2018 highlights-q1
- 1. Copyright © Arista 2018. All rights reserved.Copyright © Arista 2018. All rights reserved. Arista in Q1 2018
- 2. Copyright © Arista 2018. All rights reserved. Safe Harbor 2 This presentation and the accompanying oral presentation contain forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to management. Forward-looking statements include all statements other than statements of historical fact contained in this presentation, including information concerning our business plans and objectives, total addressable market, potential growth opportunities, market potential by speed, trends relating to increase in storage, the router market, the campus market, competitive position, benefits of Arista’s platforms, industry environment and potential market opportunities. Forward-looking statements are subject to known and unknown risks, uncertainties, assumptions and other factors that could cause actual results, performance or achievements to differ materially from those anticipated in or implied by the forward-looking statements including risks associated with: Arista Networks’ dispute with Cisco Systems, Inc. including the ITC remedial orders which prohibit the importation of Arista products (or components thereof) into the U.S., or the sale of previously imported products, Arista Networks’ ability to redesign its products in a manner not covered by such remedial orders and obtain appropriate governmental approvals for those redesigned products, any penalties assess by the ITC if Arista does not obtain such governmental approvals, Arista’s ability to develop new redesigned products in a timely manner that are acceptable to customers if Arista’s current redesigns are not approved by the ITC and Arista Networks’ ability to manage our manufacturing and supply chain including the sourcing of components on commercially reasonable terms, if at all; Arista Networks’ limited operating history; Arista Networks’ rapid growth; Arista Networks’ customer concentration; our customer’s adoption of our redesigned products and services; requests for more favorable terms and conditions from our large end customers; declines in the sales prices of our products and services; changes in customer order patterns or customer mix; increased competition in our products and service markets, including the data center market; dependence on the introduction and market acceptance of new product offerings and standards; rapid technological and market change; the evolution of the cloud networking market and the adoption by end customers of Arista Networks’ cloud networking solutions; Arista Networks’ dispute with OptumSoft; and general market, political, economic and business conditions. Additional risks and uncertainties that could affect Arista Networks can be found in Arista’s Quarterly Report on Form 10-K filed with the SEC on February 20, 2018, Form 10-Q filed with the SEC on May 4th, and other filings that the company makes to the SEC from time to time. You can locate these reports through our website at http://investors.arista.com and on the SEC’s website at www.sec.gov. You should not rely upon forward-looking statements as predictions of future events. Although our management believes that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances described in the forward-looking statements will be achieved or occur. Moreover, neither we, nor any other person, assume responsibility for the accuracy and completeness of the forward-looking statements. This presentation is being provided as of May 7, 2018 and the forward looking statements and any other statements contained herein speak only as of the date of this presentation, and we undertake no obligation to publicly update any forward-looking statements or any other statements in this presentation for any reason after the date of this presentation to conform these statements to actual results or to changes in our expectations, except as required by law. In addition to GAAP financial information, this presentation includes certain non-GAAP financial measures. The non-GAAP measures have limitations, and you should not consider them in isolation or as a substitute for our GAAP financial information. There are limitations to the use of non-GAAP measures. Non-GAAP gross margins and non-GAAP operating income exclude the impact of stock-based compensation expenses, expenses associated with the OptumSoft and Cisco litigation, and other non-recurring charges or benefits. See the Appendix for a reconciliation of all non-GAAP financial measures to their nearest GAAP equivalent.
- 3. Copyright © Arista 2018. All rights reserved. Arista Software Driven Cloud Networking 3 Doesn’t Scale Susceptible to Outage Expensive Minimal API Usage Manual Management Proprietary Lock-in Scales to Millions of Users Resilient 10x-40x more cost effective Programmatic API Usage Automated Management Open Legacy Networking Cloud Networking Mission: Deliver the best cloud networking solutions for private, public and hybrid cloud deployments
- 4. Copyright © Arista 2018. All rights reserved. Arista’s Cloud Networking Opportunity 4 Source: Dell’Oro Group Server Research Server Shipments Data Center Ethernet Switch Revenue • Enterprise workloads are migrating to public & hybrid clouds • Traditional enterprise served <100,000 employees vs. Clouds @ hundreds of millions of users • The emergence of cloud native apps & containers necessitates a new architecture Source: Dell’Oro Ethernet Switch Data Center 5 Year Forecast Jan’18 $0 $9 $18 0% 50% 100% %ofServerShipments Enterprises/Premises Cloud and Telco SP Rest of Enterprise Rest of Cloud Telco SPs Large Enterprises Top 3 Chinese Cloud SPs
- 5. Copyright © Arista 2018. All rights reserved. Share in Dollars Share in Ports Note: 10GbE and Higher - Excludes blade switches Source: Crehan Research Datacenter Switch Market Share Report Q4’2017 Arista Cisco Arista Cisco Arista Market Share vs Cisco High Speed Data Center Switching Market 3.5% 5.4% 7.8% 10.0% 11.6% 14.5% 78.1% 74.4% 69.4% 64.7% 57.8% 53.0% 52% 56% 60% 64% 68% 72% 76% 80% 0% 4% 8% 12% 16% 20% 24% 28% 2012 2013 2014 2015 2016 2017 4.9% 6.7% 9.3% 12.0% 14.4% 14.7% 71.4% 70.8% 65.9% 60.6% 51.6% 49.9% 48% 52% 56% 60% 64% 68% 72% 76% 0% 4% 8% 12% 16% 20% 24% 28% 2012 2013 2014 2015 2016 2017
- 6. Copyright © Arista 2018. All rights reserved. Market Potential by Speed Data Center Ethernet Switch Revenue ($Bn) 6 Source: 650 Group December 2017 Long Term Ethernet Switch forecast *Shows discrete 25G or 50G ports only. A significant portion of 25/50GE server ports are expected to connect via QSFP-100G break out to 100 GE switch ports at the large Cloud Service Providers. $0 $10 $20 RevenueInBillions($) 25 Gbps* 10 Gbps 1 Gbps 40 Gbps 100+200 Gbps 400 Gbps Software 50 Gbps* 800 Gbps
- 7. Copyright © Arista 2018. All rights reserved. Evolution of the Universal Cloud Network Architecture 7 Access Distribution Core Switching Legacy Core Routing Optical DCIInternet DCIInternet Spine Leaf EW Universal Spine DCI Transit Peering Universal Leaf Internet Inter-DC WAN Universal Leaf-SpineLeaf/SpineLegacy Routing is Integrated into the Universal Spine and Leaf
- 8. Copyright © Arista 2018. All rights reserved. Proven Architecture Flexibility Open, Programmable, Modular, Scalable 8 One Image, Flexible Packaging Option One Tool for Automation, Control, Telemetry and Diagnostics Arista EOS Abstraction Layer Hardware System Design Merchant Silicon 10G, 25G, 40G, 50G, 100G à 400G Leading Performance in Cooling, Energy Efficiency, Serviceability, Scale and Breadth of Optics Leading Performance Best of Breed Merchant SiliconBali Alta Petra Arad Jericho+ Trident+ Trident-II Trident-II+ Tomahawk Tomahawk+ Helix XP80 15 Silicon Families Automation, Telemetry, Diagnostics Jericho Trident-3 Tomahawk-2
- 9. Copyright © Arista 2018. All rights reserved. Arista’s EOS offers an Open Programmable Environment with Flexible Packaging Options 9 EOS was engineered from the beginning to support open Linux with rich APIs. Adhering to this principle enabled a scalable architecture that offers flexible packaging options in an open programmable environment. Arista Hardware x86 Server EOS (Linux) Multi-Hypervisor X86 Server Arista hardware 3rd Party hardware Linux Kernel Container Docker/Kubernetes cEOSVM vEOS (Linux) HW+SW Bundled Solution vEOS Router vEOS Lab Kernel independence (Cloud) Hardware Disaggregation cEOS Lab Standard EOS EOS in a virtual machine EOS in a container Use cases Architecture JSON-RPC OpenConfig/YANG NETCONF NetDB Streaming EOS SDK EOS APIs
- 10. Copyright © Arista 2018. All rights reserved. A Single EOS Image Underpins a Sustainable Competitive Advantage 10 A single image improves network availability while lowering TCO. Legacy vendors can have more than 5 images with multiple management tools, adding complexity, multiplying cost and reducing stability. Hybrid Cloud vEOS Router in AWS vEOS Router in AzureColocation Datacenters Internet CDN/WAN Internet and Colocation On-Prem Cloud Datacenters Datacenter Interconnect DCI DCI Campus Services Campus Cognitive Cloud Campus Tap Aggregation Visibility Network Tool Farm DANZ Tap Aggregation IoT
- 11. Copyright © Arista 2018. All rights reserved. Arista’s Cloud Scale Software Architecture 11 Processes are Self-Healing Legacy – Spaghetti Code Arista Programmable EOS Susceptible to Process Failure OTV MSDP PIM IGMP IGMP Snoop CoPP ISISEIGRPOSPFRIPBGP STP ACL U4RIB U6RIB IPQOS LC FIB Custom Linux Open Linux Custom ASICs Merchant Silicon Publish Notify Scalable Resilient Programmable • Differentiated Advantages - Stateful Orientation - Modern, open, and scalable architecture - Software Quality
- 12. Copyright © Arista 2018. All rights reserved. Cloud Networking is Everywhere: Three Key Markets – One Architecture – One EOS 12 Turnkey Driven Arista Cloud Converged Enterprise Best of Breed Driven Arista Cloud Class Custom Automation/ Telemetry or Key Verticals Scale and Control Driven Arista Cloud Scale Custom Automation/ Telemetry Cloud Titans
- 13. Copyright © Arista 2018. All rights reserved. CloudVision: Multi-Function Hybrid Cloud Platform Overlay Integration API’s for simplified network integration to a best of breed ecosystem Change Controls Network-wide upgrades, rollback and snapshots. Compliance and Bug Visibility Telemetry & Analytics Real-time state streaming and historical analytics DANZ TAP Aggregation Purpose-built to capture traffic at cloud scale and speed Automated Deployments Initial and ongoing provisioning network- wide Macro- Segmentation Services (MSS) Service insertion for securing today’s cloud networks
- 14. Copyright © Arista 2018. All rights reserved. Disruptive Cloud Economics for Routers 14 Interface Types 100G Density Software Features Power (per 100G port) List Pricing (per 100G port) Legacy & Ethernet Ethernet ~80 Ports 576 Ports ~200+ watts 23 watts $100,000+ $3,000 Legacy feature sets Cloud-optimized Routing, FlexRoute Scale, Programmable Traffic Engineering Traditional Router Arista 7500R Spine 7500R disrupting router market w/100GbE routing transition Arista’s Disruptive Economics
- 15. Copyright © Arista 2018. All rights reserved. “Restitching” the Internet 15 Internet Region B DC2 Region A DC1 200G Coherent - 500km, 20Tbps fiber pairNorth Carolina Washington, DC Regional DCI 100G Coherent +5000km 10Tbps per fiber pairOregon Virginia Long Haul DCI 100G QSFP Up to 70kmNew York New Jersey Metro DCI 128 ECMP 3x Internet Routing Table in Hardware 10x Access Control Lists 100x High-rate sFlow 1. Scale out the Datacenters 2. Interconnect Metro, Regional,… Datacenters 3. Interconnect Private Backbones4. Establish New Peering Relationships 7500R with 15 Petabps Spine Capacity Integrated Encryption with DWDM Options “Restitching” the Internet The Universal Spine - WAN
- 16. Copyright © Arista 2018. All rights reserved. Cloud-Class Market Leadership Platform Portfolio 16 Diverse Merchant Silicon Architectures Single-Image Arista EOS Across All Platforms 7500E/R Series 7150, 7160 & 7280R Series7050X/7060X Series 7300X3 Series Spine/SplineTMLeaf Volume Value New in Q1’18 7050X3 32 100GbE Ports 48 25GbE, 12 100GbE Ports 64 100GbE Ports 7260X3
- 17. Copyright © Arista 2018. All rights reserved. Scaling up the Cloud Universal Spine and Leaf Common single EOS image, Deep Buffer, Lossless Architecture, Large Tables Choice of form factors, density and port speeds for varying use cases Standards based switching for reliable deployments 7500R Universal Spine 7280R Universal Leaf 10G, 25G, 40G and 100G Line cards 48 10G-T and 6 100G 48 10G-SFP and 6 100G 48 100G and 8 40G QSFP 56 40G and 16 100G QSFP 24 40G and 12 100G QSFP 60 100G QSFP48 25G SFP and 6 100G 30 100G QSFP
- 18. Copyright © Arista 2018. All rights reserved. Expanding Ecosystem 18 Virtualization/ Containers Cloud and Storage Leaders Network Security / Workflow Automation • Drive Automation with best of breed partners: security, overlays, orchestration, and storage • Advanced Analytics and network wide services • Any Work-X with CloudVision for workloads, workflows and work-streams Analytics Automation Any Cloud API Agile Work-X Available Architecture
- 19. Copyright © Arista 2018. All rights reserved. Major Verticals 19 Note: By Billings. Only selected verticals shown. Diagram not to scale. 67%33% Americas International Moderate Large Follower Early AdopterPace of Adoption Financial Services Tier 1, 2, 3 Service Provider Cloud Specialty & Hosting Providers Rest of Enterprise Cloud Titans Retail Government Oil & Gas Business Services Manufacturing Research Labs Healthcare Education Media & Entertainment Q1 2018
- 20. Copyright © Arista 2018. All rights reserved. 1 Amounts are non-GAAP except for Revenue; refer to reconciliation between non-GAAP and GAAP in the appendix. 20 Financial Highlights1 269 290 328 335 405 438 468 472 $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Millions Total Revenue 64.1% 64.6% 64.4% 64.2% 64.4% 64.4% 65.9% 64.4% 0% 10% 20% 30% 40% 50% 60% 70% Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Gross Margin 27.9% 30.0% 32.3% 30.2% 36.3% 38.6% 36.1% 35.3% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Operating Margin 0.74 0.83 1.04 0.93 1.34 1.62 1.71 1.66 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 $1.80 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Diluted EPS
- 21. Copyright © Arista 2018. All rights reserved.21 Balance Sheet & Cash Conversion Cycle 209 270 213 247 207 56 61 45 49 39 0 10 20 30 40 50 60 70 $0 $50 $100 $150 $200 $250 $300 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Millions AR and DSO AR DSO 287 364 333 306 268 1.7 1.6 1.7 1.8 2.2 0.0 0.5 1.0 1.5 2.0 2.5 $0 $50 $100 $150 $200 $250 $300 $350 $400 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Millions Inventory and Turns Inventory Turns 228 232 244 217 170 0 50 100 150 200 250 300 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Cash Conversion Cycle 1,043 1,125 1,343 1,536 1,738 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 $1,100 $1,200 $1,300 $1,400 $1,500 $1,600 $1,700 $1,800 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Millions Cash, Cash Equivalents & Marketable Securities
- 22. Copyright © Arista 2018. All rights reserved. Foundational Technology Underpins TAM Expansion • We partner with customers and follow their journey • EOS software drives repeat purchases, Arista cultivates customer advocacy • EOS software organically enables additional use cases 22 Chart illustrates the top 15 customers based on the last 12 quarters of total product and service billings.Additional Purchases Did Not Purchase Top 15 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Customers 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2018 Customer 1 Customer 2 Customer 3 Customer 4 Customer 5 Customer 6 Customer 7 Customer 8 Customer 9 Customer 10 Customer 11 Customer 12 Customer 13 Customer 14 Customer 15
- 23. Copyright © Arista 2018. All rights reserved. 1 Amounts are non-GAAP except for Revenue; refer to reconciliation between non-GAAP and GAAP in the appendix. Arista Highlights - First Quarter 2018 23 Mission: Deliver the best cloud networking solutions for private, public and hybrid cloud deployments • Arista Networks announced an expanded family of platforms delivering 10x performance for switching and routing. The new generation of 25G and 100G systems add new capabilities for visibility, load balancing, network segmentation, scale and allow both Cloud and Enterprise customers to easily migrate their networks, retaining operational consistency. • Arista Networks recognized as a leader with the top score in the current offering and strategy categories in The Forrester Wave(TM): Hardware Platforms for Software- Defined Networking, Q1 2018. • The European Advanced Networking Test Center (EANTC) has successfully verified the interoperability of key Arista EOS® (Extensible Operating System) routing capabilities at the MPLS + SDN + NFV World Congress 2018 interoperability showcase. Q1’18 Revenue: $472.5M Q1’18 EPS: $1.66 Q1’17-Q1’18 YOY Revenue Growth: 40.8% Q1’18 Gross Margin: 64.4% Q1’18 Operating Margin: 35.3% Key Highlights Financial Results (non-GAAP)1 Q1-2018:Q1-2018:
- 24. Copyright © Arista 2018. All rights reserved. Arista Highlights - First Quarter 2018 24 Download Report “The Bay Area Best Places To Work”. 130 companies have been selected for the Top Workplaces award and Arista Ranked in the Top 10 of the Large Companies Category.
- 25. Copyright © Arista 2018. All rights reserved.25 Appendix: GAAP to Non-GAAP Reconciliation
- 26. Copyright © Arista 2018. All rights reserved.Copyright © Arista 2018. All rights reserved.26 Arista Cognitive Cloud Networking for the Campus
- 27. Copyright © Arista 2018. All rights reserved. Cloud Principles Applied to Network Transformations 27 Rigid Architecture Inefficient Operations Inflexible Service Delivery Multi-protocol Custom Silicon SoftwareHardware Scale-Out Simplify Software-driven Control Ethernet+IP Merchant Silicon Cloud PrinciplesLegacy Approaches Can Cloud Principles apply to the Enterprise Campus?
- 28. Copyright © Arista 2018. All rights reserved. Cloud Principles Break Down Enterprise Networking Silos 28 PIN Silo Edge Routing (DCI / WAN / Branch) Public Cloud (Cloud Service Providers) Data Center (Private Cloud) Campus (Enterprise Wired/Wireless) PIN Silo PIN Silo PIN Silo “PINs to PICs” DC1 DC2 DC3 Campus1 Campus2 Campus3 Cloud2 Cloud3 Routing1 Routing2 Routing3 Places-in-the-Network to Places-in-the-Cloud Cloud1 Simplify Operational Models based on Cloud Principles Platforms impose rigid operational models
- 29. Copyright © Arista 2018. All rights reserved. Simplifying Architectures with Arista Campus Spline 29 Arista Spline® Collapsed Core/Agg Network wide Resiliency Software Consistency Hierarchical Architecture Brittle Device Resiliency Software Puzzle Legacy Any Edge Campus Services Reduce Operational costs with a simplified architecture
- 30. Copyright © Arista 2018. All rights reserved. Cognitive Campus Platforms 30 Cognitive Campus Platforms…leveraging Cloud & Data Center principles 7300X3 Modular System Up to 256 100G ports 7050X3 Fixed System Up to 32 100G ports Spline™ Platforms Cognitive OS Cognitive Management Simplify with collapsed Spline architecture Hitless Patching, HA with SSO Flow Telemetry NetDB streaming Secure Macro Segmentation Service Dynamic Path Selection Zero Touch Provisioning / Repair Automated Upgrades & Rollback (SSU) Compliance & Audit Network-wide Analytics, including machine learning Cloud Network Topology Single Software Image consistency Federated across DC & Campus
- 31. Copyright © Arista 2018. All rights reserved. Universal Cloud Networking Designs for the Campus 31 L2 / MLAG L3 / ECMP VXLAN Overlay Consistent, Standard-based Design Choices Collapsed Spline Universal Spine Any Edge Campus Services Universal Leaf Campus Cognitive Management Plane Data Center Spline WAN/Internet
- 32. Copyright © Arista 2018. All rights reserved. Arista X3 Series: Spline Platforms High Density Modular 100G/25G for Campus Spline Two Chassis: 4 and 8 slot with 50Tbps Fabric Linecards: 32x100G QSFP 48xSFP-25G & 4x100G 32 Single EOS image with CloudVision & Cognitive Features 7300X3 7050X3 Fixed 100G & 25G for Campus Spline 32 x 100G and 48 x 25G with 100G uplinks 10G to 100G port flexibility Industry-leading Power Efficiency Large scale L2/L3 Tables Flow Tracer Dynamic Path Selection Dynamic Shared Buffer Smart Software Upgrade Unified Forwarding Table Remote Monitoring Macro Segmentation
- 33. Copyright © Arista 2018. All rights reserved. Cognitive Management Plane 33 Network-Wide Database State streaming Data Center Turbines: • Trending • Correlation • Anomaly Detection Leveraging Data-Driven Analytics for Intelligent Action Campus Analytics Engines • Notifications • Enforcement • Remediation Partners Cloud Full State History Full Network View Scale-out Clusters Machine Learning In-service Roll-out Actions
- 34. Copyright © Arista 2018. All rights reserved. Cognitive Cloud Networking for Campus 34 Campus networking is burdened with complexity and limited competition Enterprises can achieve simplification through common operational models Arista’s Cognitive Campus approach extends proven DC cloud principles Arista Spline™ is the first step in the Arista Cognitive Campus journey 1 2 3 4
- 35. Copyright © Arista 2018. All rights reserved. Cognitive Campus Networking Collateral • Jayshree’s Blog - Unveiling Cognitive Campus Networking • Ken’s Blog – CloudVision: A Cognitive Management Plane • Video: Arista Networks Introducing the Cognitive Campus • Press Release - Arista Introduces Cognitive Cloud Networking for the Campus • Investor Relations Presentation with Cognitive Campus Slides • Arista Cognitive Campus Network Whitepaper • Cognitive Campus Webpage 35
- 36. Copyright © Arista 2018. All rights reserved.Copyright © Arista 2018. All rights reserved. www.arista.com Thank You