All right, let's get started. So, I'm Aaron Rakers. I'm the IT Hardware and Semi Analyst here at Wells Fargo. Thank you all for joining us this afternoon. Pleased to have Ita Brennan, the CFO of Arista, on stage. I should mention, you know, you announced earlier this year plans to retire.
Right.
You know, so, you know, hopefully, you're doing much more enjoyable things and seeing places, not coming to conferences next year. But, congrats on the fantastic tenure at Arista.
Thank you.
So why don't I kind of just start the discussion? You guys just recently had an Analyst Day. You unpacked the longer-term kind of growth, you know, story for the company. I think you talked about a 2022-2027 CAGR of around 15%. Yeah, maybe just help us understand how you frame that. You know, do we think about double-digit growth, you know, out in the latter years of that, you know, framework? Just kinda unpack that kind of thought process in that growth profile.
Yeah, I mean, I think we started with, you know, just kind of stepping back and looking at the business and, you know, we've grown so fast over the last couple of years, like, we grew almost 50% in 2022. We're on track for, like, a 33% growth rate this year. We've essentially doubled the size of the business in two years, from 2021 to 2023. So, you know, even internally, we were thinking about kind of, you know, what does this business look like over time? Because it is becoming larger, and you have, you almost have two different growth drivers inside of the company. With the cloud, you know, which tends to be more of a kind of cyclical grower.
And then you have enterprise, which, you know, has been a much more steady kind of, you know, we're, we're taking share, and we're executing on a more kind of consistent, gradual, basis. So trying to take all of those inputs and, and think about what would be a reasonable, you know, growth rate. Again, not trying to pick the slope of the curve, right? 'Cause I think that's we just don't have the, the knowledge to be able to do that yet. But kind of looking at kind of that time period. And, you know, we have a very kind of serious focus internally around this idea of double-digit growth, because we think that makes the model very powerful from a, you know, an earnings perspective, et cetera.
So looking at that and thinking through, you know, some of the initiatives that we have, looking at kind of how the market thinks about growth in those two pieces of the business. You know, if you look at the market growth for kind of some of the cloud pieces of the business, it kind of lines up with that. And then thinking about kind of what we could continue to do in enterprise and campus over time, and kind of taking all of that and saying: Okay, is it reasonable to think that you could achieve kind of that double-digit growth over that time period? Again, without trying to pick the slope of the curve, because I don't think we have the fidelity to try to do that yet, at this point.
Yep. No, that's a good overview. And just to kind of think about that overview, and I'll touch on campus here in a minute and some of the other adjacent opportunities that you've talked about. But, you know, clearly you and I will talk deeper about the AI opportunity, as you'd imagine, but you talked about $750 million target, you know, 2025. You know, that growth rate would embed that expectation. So I guess the question is, like, is there conservatism embedded in the non-AI piece of the business, you know, to hit that double-digit? 'Cause it starts to become a big number as you look out to 2025.
Yeah, I think, you know, this idea of AI, non-AI, it's really important right now because it's kind of a way to see how the technology's kind of proven, and it'll show us kind of how... But over time, I don't know that we're gonna care that much.
Yeah
H onestly, what's AI, what's not AI. It's gonna be a lot of the same products going to the same customers. But, you know, in the, in the near term, we kind of understand that it's important to everybody to see kind of the progress that we're making, right? As we start to make some progress, particularly on that back end kind of opportunity, and that's what we were trying to do. It's a top-down number. It's not that we have perfect knowledge of what that number is going to be, but it is something that we're gonna attempt to measure and provide you with some, you know, kind of milestones on, just to at least at this timeframe, to give some understanding of what's happening. But eventually, I think we're not gonna care, right?
Yep.
You know, so, you know, right now, is there a shift towards, you know, more of the AI-related spending on the part of customers? You know, I think part of our framework for a while now, we've been talking about it for a while, is that we thought 2024 would be, you know, a cyclically kind of moderated cloud year. I think that's still the case, right? There are definitely dollars that are going towards GPUs and AI. They have spent a lot on kind of, call it classic, et cetera, over the last couple of years. You know, do we expect that we'll start to see some investment come back on that, on the classic stuff as we go through the year? You know, you hear Microsoft certainly talk about investing in both sides-
Yep
... of that infrastructure. So, but yeah, we had kind of built in this idea that, you know, there is probably a slowing in, call it classic, if you want, and that some of these dollars maybe get redirected to AI, and then you start to have some new products that are addressing both in some ways, in the longer time frame.
Perfect. Perfect. Campus.
Mm-hmm.
Maybe talk a little bit about, you know, the success you've seen there. You know, you talked about a $400 million target. How do you think about that progression on the campus opportunity for Arista?
Yeah, I think we're making good progress against our $750 target.
Yep.
You know, we were kind of somewhat light on revenue last year.
Yep
Mainly because of supply. I think we've, you know, we've helped solve for that as we've gone through this year. You saw that kind of in the overall kind of enterprise growth numbers for the year. I mean, there is a piece of that that is kind of addressing that supply issue and then, you know, some continued kind of share gains and progress, as well this year. You know, the campus opportunity is big, right? It's large and it's, you know, there's about 50% of it that is large enterprise, you know, which even from a go-to-market is right kind of in our sweet spot, and that's obviously the target. The first target for us, right, is to continue to execute against, you know, large enterprise campus opportunities. Sometimes they'll have data centers, sometimes don't.
But gaining kind of that, an opportunity and then expanding within those accounts is definitely a part of the progress that we're making there. Over time, you know, we are focused on expanding the channel, but that's that has to be a very methodical, kind of incremental thing, right? Where we'll find new partners, we'll, you know, develop business models with new partners, et cetera. But it's not, it's not something that you can accelerate overnight. It does have to be methodical, and the more successful we are broadly in the campus or in the enterprise, then, you know, the easier that channel will become, right? Because there'll be more interest in kind of carrying Arista as part of the channel as well.
Is it fair to say, like, you know, I don't know, you might look at the numbers, you have any thought around you win on campus, it pulls data center in the enterprise? Have you seen that, or is it vice versa? Like, "Hey, we've got a footprint in data center, and we're really starting to see the campus piece of the business get pulled from that.
Yeah, I mean, we had come into this thinking it would be mostly the latter, right?
Yeah.
And that we would see... You know, because that's how we got there in the first place.
Yep
...right? What we'd see kind of data center customers kind of pull us to the campus. But, you know, we've been surprised at how many kind of campus-first or campus-only opportunities there's been, right? So there is kind of a, you know, there's an interest in, from customers in kind of improving those campus footprints, and part of it is, like, a campus is no longer just an office, right? Although offices are a part of that, right? But you've got, you've got all sorts of other campuses as well, right? I mean, we had, we hadn't really played in kind of education or healthcare or manufacturing, those types of mini verticals prior to COVID. But with some of the changes and the more reliance on IT that kind of came out of that period, I think we see more of that now, right?
Yep.
You know, your campus network operator has, you know, has a lot of pressure to, you know, maintain that IT infrastructure and optimize that IT infrastructure now. That's kind of... You know, you saw Ken's presentation at the Analyst Day, but, you know, Ken's passion more and more as we get more engaged with these enterprise customers is, you know, how do you make the running of these enterprise networks, whether it's campus or data center, more efficient, right? How do you, how do you automate more? How do you give them tools that, you know, have been deployed in the cloud for a long time now?
Yep.
How do you make that available? How do you improve kind of the service that they can provide? And, and so he spent quite a bit of time, and will continue to spend quite a bit of time looking at how we kind of tweak some of the software offerings, et cetera, to, you know, to optimize that, right, for them.
And that kind of intertwining of that strategy is CloudVision.
Mm-hmm. That's right.
You know, how that portfolio all fits together. And then, and then kind of segueing from there into some of the other opportunities, routed WAN, security, observability. You know, how, how do I think about success in those other adjacencies as, as we look forward?
Yeah, I think the goal is to kind of take the... If you have a data center, then data center all the way through the campus, but even within the campus universe, you know, how do we kind of encapsulate as much of that as we can, you know, on an Arista platform, so that we can manage it with CloudVision and provide visibility, et cetera? You know, leveraging kind of that end-to-end solution, right? So what you're seeing us do is kind of fill in, you know, some of the pieces where, you know, we didn't have a solution. You can always look at that and say: Are you better kind of partnering? Are you better, you know, buying, or are you better making?
There are core kind of networking things that obviously we believe we should do. SD-WAN is one of those, right? We feel like by doing it as part of EOS and part of that solution, you can deliver something that's differentiated. You know, Wi-Fi was a good example of where our starting point was to buy and then integrate kind of the, you know, the management plane of that into CloudVision. So we'll continue to do that, right? The NAC solution, AGNI, that we just announced. It was one other piece that was a pain point for customers to be handing off to somebody else, so you solve that. So I think we'll continue to...
Yeah, the security piece is really interesting just because we have this trove of data from EOS, and then what can you do with that? We're still figuring some of that out, right? But we are starting to use that in conjunction with some of the visibility and, you know, AVA, and the solution that we acquired with Awake, right? So you'll see us continue to, you know, kind of tweak and add to that end-to-end solution, trying to always trying to stay true to leveraging something that we believe is really differentiated, which is the EOS and the data that EOS is collecting.
So, when I roll that all the way back and go back to kind of the 15% CAGR, you know, what you outlined, not this Analyst Day, but two Analyst Days ago, was really this, this Arista 2.0, kind of the, the, the platform story. You know, a lot of those other things, routed WAN, security, observability, et cetera, are, are they kind of embedded in the expectation as you look out at that, that company? Or, like, but if... Or is it more like, if we're successful here, that's kind of additive to the, the expectations?
Yeah. I mean, I think all of this is what's gonna allow us to be successful, and continue to kind of... I mean, why? Because it's not trivial what we're trying to do, right? We just go into a, you know, a large, kind of established market and drive share gains and target share gains. So you're gonna have to be delivering something that's incrementally better to be able to do that, right?
Yep.
I think these are all contributors to kind of why you win customers, why you win new footprint, why you win ports, if you like. Part of it, you'll get paid for by winning, right?
Yep.
And winning those ports, and that, that these, these kind of management tools, et cetera, are a big part of the, the discussion that starts with the customer, and just making and driving kind of cost out of just operating those, those footprints, right? And then the other piece about it, I mean, we are driving some software-only monetization out of this. Some of these are value-add features that we can sell as a subscription license, and we are doing that. You know, and we'll continue to do that, but it's both, right?
Yep.
I mean, both of those are valuable and kind of allowing us to continue to gain share in that campus enterprise market.
Perfect. So, you know, I'm gonna kinda fine-tune on kind of the growth expectation. 10%-12% was the growth guidance for 2024. You know, I guess, you know, obviously, always a lot of people have a hyper-focus on the hyperscale cloud guys, your contributions from Microsoft and Meta. I think you've talked about kind of large cloud plus AI now, that vertical being 40%-45%. Does that embed, does your 10%-12% embed an expectation that Microsoft and Meta are 10%+ customers, or the total aggregate is 40%-45% in 2024?
Yeah, we haven't, at this point, tried to break down 2024 between-
Yep
... the verticals. I mean, the greater than 40% was a 2023 comment. You know, we haven't talked about whether those customers individually yet, probably won't do that for, for a while, right? I think we typically kind of start to get to that level of granularity as we're, you know, moving through the year.
Yep.
Yeah, but they are important, very important customers. We're assuming they'll continue to be important customers, but we haven't. Yeah, we haven't kind of broken that out at this point yet.
I have to try.
Of course.
I'm gonna bounce around here a little bit. I wanna talk about the AI opportunity. I think you've done a good job, you know, a quarter or two ago, kind of just helping level set people the cadence of how we should think about these, these larger scale deployments, and you know, the debate of Ethernet and InfiniBand, and how that's gonna play out. This Analyst Day, if anybody hasn't seen it, I definitely go back and look at it. I mean, you talked extensively about the portfolio and what's gonna happen in next year. Just remind us again, the cadence, you know, pilot, trial, large scale deployments, how Arista sees that playing out at this point.
Yeah, I mean, I think what we've talked about is kind of, you know, some trials and technology trials this year, some pilots next year, and then production kind of deployments in, in 2025, right? And, you know, I, I think that there is a lot of technology work that's being done. I think we tried to expose some of that with Hugh Holbrook and Andy's presentations at the, at the Analyst Day. So we believe that as these technologies get, you know, get delivered, get established, that's kind of what's gonna drive some of this, these shifts in terms of, of deployments, of networking.
You know, I think you're starting to see customers, you know, publish some white papers, et cetera, to talk about Ethernet and how they see, Ethernet kind of as a, you know, as a networking solution for AI, as we move through these product, transitions, and it's performing well. And I think, you know, our expectation, obviously, is there's work to do, but we do believe that once you get to large-scale, multi-tenanted footprints, then Ethernet has, you know, brings advantages there.
Yep.
And, you know, it's just native to everything that's already been done in these large footprints as well. So there's just a natural kind of... You have the expertise, you have the capabilities, et cetera. So I think that's the- but, but there's work to do, right? So that's why we think, you know, trials, like, lots of discussions around, you know, what's the right way to, you know, to evolve these, these architectures. Andy likes to say, you know, "Whatever we think today, probably won't be exactly how it's gonna play out," right? You will see shifts in the architecture, and again, the network is gonna underpin that. And building the best, most flexible network you can is really what's important for us.
And then, as long as there's traffic being generated, we should be able to transport that traffic, and that's kinda how we play in all of this.
So, when I try and conceptualize pilot to trials, I mean, am I thinking about trials into next year being more like 1,000, 10,000 GPU kind of clusters? And then, I know at the Analyst Day, one of the things that stood out to me was, like, you were talking, like, not just 30,000, but 100,000+ GPU clusters. Even, I think there was a slide that showed, like, 512,000 GPUs in a single Ethernet network. I mean, is that the size and scale we should be thinking about once these things really start full ramp deployments in 2025?
Yeah. I mean, if everything, you know, progresses with AI in the way that we think it will-
Yep
... and it becomes so impactful across, you know, all of these services and for these, for these customers, then yeah, I mean, that's, that's what it's going to be, right? If you think about the scale of their footprints today, at their massive scale-
Yep
... and this is only gonna kinda compound that. So I think, you know, you will and you will see these very large, clusters and very large deployments. And, you know, what the timing of that is, we'll have to see, but that's, you know, assuming that this is really transforming business models across the board, as we think it will, right? Then, then it's gonna cause those customers to need to, you know, have those deployments, right? Again, timing, it's difficult to tell exactly what that timing will be, but over time, there is this progression. And, you know, and it's been part of their thinking, you know, for some time, that, that this is a, you know, a further evolution of kind of their footprint and their, and their services.
you know, some of the generative AI stuff is more prevalent now, but there's always been this move towards AI kind of embedded in-
Right
... some of those infrastructure deployments anyway.
So would it be fair to assume, like, you know, characterizing your visibility into these opportunities, if we're talking that size and scale of footprint deployments, that you would start to... I mean, what are you messaging today? Like, you're getting line of sight into some of that already because, you know, power envelope, getting the GPUs, and it's not like this stuff happens in a quarter, right? You'd start to see that visibility certainly ramp up as we, as we move through the next year.
Yeah, I think the technology comes first always, right?
Yep.
I mean, if we were sitting here today just talking about 800G , it'd be essentially the same discussion, right? We have to, we have to align on technology and then deliver technology. Customers have to evaluate it, and then you'll start to see kind of what you can expect from dollars, et cetera, right? That, that execution on product always comes first, right? I mean, it's not different if you think back to the last cycle or the cycle before that. You have to earn, right, by delivery of products. So I think the alignment on technologies, et cetera, is happening now, right? Then there'll be more product delivery, there'll be trials, and then it'll go from there. So I don't know that we—I mean, we don't have perfect line of sight to kind of, you know-
Yeah
... what's gonna happen in 2025 at this point. But we're executing on the building blocks.
Yeah, I appreciate that. I think one of the things that's been somewhat eye-opening to me is when you're talking about these big GPU clusters, and you're talking about, you know, particularly on the training side, having to work in conjunction, kind of cohesive, you know, have cohesive performance across all of these GPUs, that just the natural network and spend intensity is higher relative to your traditional. How do you characterize the spend? Like, I used to think in the past, like, you know, high single-digit percent spend on network versus compute. How does that look in AI?
Yeah, I mean, it may be a little bit more in more intensity-
Yeah.
But I don't know that it's a huge shift, right? I mean, Jayshree had talked about 10%-15%, but that was kind of including, you know, some of the optics spend. So that's-
Right.
So I think there is some increase in intensity, but I don't know that there's a major shift, as we go through this.
Okay. And then I'll wrap up on maybe the AI stuff, and with this question is: you know, one of the things that I arguably still need to unpack and maybe appreciate a little bit more is, you mentioned two things at the Analyst Day, Distributed Etherlink Switch, and Linear Pluggable Optics. To me, it sounded like those were core building blocks of differentiation for Arista as we get into next year. I know you're the CFO, but I'm kinda putting you on the spot. Why are those important? What are... What's differentiated about those?
Yeah, I think the DES is gonna be a very efficient fabric for AI, large-scale AI deployments, right? And obviously, the goal is, you know, lossless transport and using kind of, you know, creating a fabric that can handle very large AI clusters. On the optics side, I think it's not necessarily a revenue driver for us per se. It's a solution to the power envelope, and it's a contributor to solving the power envelope, right? So we've kind of played a role in optics where, you know, we don't resell a ton of optics.
But we're very vested in making sure that kind of, you know, the optics ecosystem is evolving at pace with everything else, and that, you know, the overall kind of solution can be deployed successfully. And that, you know, so a lot of focus on power in that, and I think it is potentially a big advantage from a power perspective, and it would be deployed in conjunction with Avago and some... and their solutions. But really the key there for us is it helps to kind of solve for the overall power envelope of what a deployment would look like.
I guess I was thinking about, like, if you can have a platform that supports that, and you can reduce power consumption by, I forget if it was 30% or even 50%, you know, relative to traditional optics, and I think importantly, it's backwards compatible, right? Like, you, you will be able to deploy and say, "Hey, Mr. Customer, want these Linear Pluggable Optics?" I mean, that is a differentiator.
Right.
Would you argue that Arista's taking a leadership position on?
I mean, I think it certainly enables us to deploy the overall solution.
Yep.
Right? And make the overall solution better. I mean, again, it's not that we're necessarily looking to resell that in volume, right? It's more, again, create an overall architectural design that solves the problem for the customer, and you'll get deployed more, right?
Yep.
I think that's always been kind of our approach to that.
All right, so I'm gonna bounce maybe a little bit more to, you know, the financial model and some of the puts and takes on that front. So, one of the things that obviously I think a lot of investors have asked you about is just this normalization process of purchase commitments, supply chain. I guess, how are you seeing that right now? And ultimately, what I'm gonna ask you is what's the right days of inventory for Arista? How do I think about how much you've had to lean in on the supply chain and how much inventory you carry? What's the right normal for you now-
Right
... as we move forward?
Yeah, so there's two pieces. Obviously, there's purchase commitments, and then there's kind of the inventory that we're carrying ourselves on the books, right? You know, stage one was kind of solve and push on purchase commitments as, you know, supplier lead times start to improve, right? And, you know, I think we've been doing that. We've been doing a good job of that. You know, a big piece of that, of what's remaining is going to be related to some of the key components that still have extended lead times, right? I mean, we still have suppliers, significant suppliers out at, you know, 52 weeks, plus or minus, lead time. That's gonna cause that number to... You know, we still have some work to do.
I think we can still bring it down as we go through 2024, but it's gonna hit a point where if the, you know, if those key components maintain that long lead time, then it's gonna be more elevated than where it was before, right? So we're continuing to drive that. I mean, we want to step out of the, you know, the contract manufacturing supply chain, because they should run that. We're making good progress to being at that point. And then, obviously, the key components will continue to be engaged in. On the inventory side, it's something of the same. If you look at kind of. You can see in the filings, the split between raw materials and finished goods. You know, the raw materials is obviously more, much higher than what it used to be.
Again, that's linked to kind of just how much inventory we need to carry because of lead times. As lead times improve-
Yep
... we'll have the opportunity to improve that. On the finished goods side, I mean, we're carrying probably certainly more than we were more recently, just because, you know, that was very tight. I think we still, we still have some room where we can improve that as well. But it doesn't. I don't know that it changes that much if you look at it on a turns basis. So I think we'll improve turns slightly as we go through the year, and then, you know, it probably bottoms out there unless we get some, you know, improvement on lead times on key components. And that will help us to kind of improve that further. But that's going to become kind of the, the bottleneck, if you like, to driving it back to anything like where it used to be before.
Because if you think back, those key components were, you know, 13-26 weeks-
Right.
You know, in the old days, right?
Right.
And we thought that was long at that stage, but if it stays at 52 weeks, then it's gonna get harder to kinda drive that back to anything like what it used to be.
You're still in that 52-week range on some of those?
We're still in 52 weeks-
Wow!
at that point.
So, it's hard to put a defined number out there, I guess, is what I'm hearing from you. Like-
Yeah, I think it-
You were 335 days of inventory last quarter-
Right.
If my math's right.
Right, which is, you know, not something from a financial perspective that I like, but then when you start to look at the pieces-
Yep
... I think you can improve it from there. But I don't think we get to your—I think you had suggested 200 or something. I don't think it goes back to that, right? I think you get kind of held up by the key components, and until that changes-
Yep
... then if that improves, we'll have an opportunity to kinda drive it further.
So, one of the other questions I was gonna ask you about is, you know, the 10-Q, and you mentioned, you know, the inventory breakdown's interesting, the purchase commitment color and stuff like that. But one of the other things I think I've asked you this offline a couple of times, but I'm gonna ask you again here, is that one of the disclosures is this idea of binding contractual agreements related to future product shipments. And I think that balance was $507 million exiting this last quarter, and, you know, exiting 2022, it was like $960 million. What is that? I mean, is that... That's obviously future-
Right
... deliveries of product.
Yeah, so we had, you know, largely our, our orders, customer orders are not contractually non-cancellable, r ight? I mean, as we went through the supply chain, we agreed with customers, we vetted kind of their, what they were trying to buy, et cetera, et cetera, and we got to a pretty good place. But contracts, pure, literally contractually binding, we didn't go and reformat all the contracts to try to do that. There were, though, some new opportunities, new projects, et cetera, where we did, 'cause we were doing new paper and we had an opportunity to do new paper. So that number will kinda go to zero eventually.
Okay.
Right? It's, it's just as we continue to kind of process through those and, you know, some of the newer deals won't be on kinda contractual, on a contractual basis. So that number should eventually kinda head towards zero.
Okay, that's helpful. 800 G, you know, and one of the things that we've been thinking about and, you know, Broadcom, I think, made a comment last quarter that, you know, their Jericho3-AI and Tomahawk 5 silicon would ship over the next, I think it was six months or something. Have we seen any shipments of those platforms for-
Yeah
... Arista at this point, or is that, like, 800 G, that 51.2 silicon, that really a 24 dynamic?
Yeah, we haven't announced any of those-
Okay
... products yet, right? So but that's obviously underpinning a lot of the... When we talk about new products in 2024 and beyond, it's, it's, that, that's what they're underpinning.
Okay. In a couple of minutes we got left, I've got a couple other quick questions. So services and support, you know, it's 16.8% of revenue last quarter. I think you guys reported in the P&L, like, you know, services revenue, you know, 14.8%. The delta between that is basically software. I mean, are we starting to see... You mentioned earlier software monetization, you know, is there a software monetization dynamic to maybe start to think about?
Yeah, and there's—it's probably even a little bit more than that, just because—
Yeah
... there is some software offerings that end up in the product-
Yep
... on the P&L, right? Yeah, so it's, so it's a little bit more than that spread. Yeah, I, I think, you know, the software revenue kind of it gets dwarfed when the product grows the way it's been growing, but it's, you know, it's, it's been keeping pace, right?
Yep.
which is not nothing, given how fast we've been growing, right? So there is... I mean, there are this set of value add, you know, software subscriptions like CloudVision, some of the visibility tools, you know, some of the Awake, the ex old Awake capabilities, the new, that have now been incorporated into CloudVision, et cetera, you know, AVA, that all kinda get sold as a software subscription license. That's, you know, again, it gets dwarfed by the product sometimes, but it's a nice growing kinda software revenue stream, and it is contributing kinda to the growth margin, et cetera, and it's helping kind of, you know, drive that enterprise campus piece of the business as well.
Yeah, that's perfect. So the other quick questions in the few minutes I got left: so last quarter, you know, there was no share repurchases, right?
You guys generate a tremendous amount of cash. I think you had $4.5 billion in total cash. So should I read anything into that? How are you thinking about capital allocation? And ultimately, I'm also gonna ask you about M&A. Like, how are you thinking about the strategy for Arista on that front?
Yeah, I mean, we talked about this a little bit at the Analyst Day. I mean, we'll probably always carry more cash than maybe, like, a strict financial model would indicate, just because, you know, for things like the supply chain, right? It's important for us to be able to kinda step into something like the supply chain and carry as much weight as some of our much larger competitors, right? But that said, I mean, it is our intention to return cash, and, you know, we've talked about kind of offsetting dilution, returning, you know, 50% kind of of the cash that we generate. You know, that got a little... With all of the inventory stuff, et cetera, we kinda backed off that a little bit.
And then the other piece of this is just kinda how do you approach that? Are you you know, because the stock is volatile, even mostly for reasons beyond our control, actually, like, it just moves a lot, do we try to kind of, do we try to optimize for that as well, right?
Yep.
And, you know, I think you saw us do that last year, where I think it was Q2, we were very aggressive and active on the buyback because there was an opportunity to do that. I think we'll continue to do that. So it is our intention to return to return cash, but we'll probably remain pretty opportunistic in terms of when we do that, and if there is volatility, we'll try to leverage the volatility.
And on the M&A front, is it... I mean, I don't think about Arista as being kind of a platform acquirer, really. It's really got to fold under the umbrella of EOS, maybe CloudVision. It's more just kind of tuck-in strategy from an M&A perspective. Are you seeing any change in that thought process as the companies evolve?
I mean, we look at stuff all the time, and we'll continue to, and, you know, everybody's very connected into the ecosystem. But, you know, because of the platform, because of kind of the, just, just the leverage that EOS brings and the opportunity that's there to kind of just organically kind of capitalize on that, it tends to drive us towards kind of technology, people, teams, you know, smaller, smaller M&A, right? But again, we look at things all the time.
Yeah.
I think the team is very well connected into, you know, what's happening in the industry, and we do look at opportunities all the time, but that is kind of. You know, that is kind of something that you have to solve for. You'd have to. It raises the level of conviction you need to have, right, in terms of doing something bigger.
So, one of the other questions on. I feel like a lot of times people don't, people think of Arista, and they think about, you know, Microsoft, Meta, Cloud, you know, big, big type footprint deployments. But this enterprise momentum that you've seen is, in my opinion, underappreciated oftentimes. One of the things last quarter, you grew EMEA revenue, I think it was 56%. You grew Asia- Pacific revenue, 72%. Are you starting to hit a different stride in some of the international markets? Are you investing more there? Like, is that starting to show up as a bigger growth driver for the company?
I mean, we are for sure investing internationally and, you know, sales, headcount, et cetera. We've been, we are deploying internationally. I wouldn't over-focus on that quarter, though 'cause some of that is still shipments
Yep
Kind of supply chain related, the patterns. I mean, it's, you know, it's been kind of... Our international percentage has been kind of stuck at the 25%, but again, that's the overall is growing pretty aggressively, right?
Yeah.
So those business in those regions is growing, too.
Yep.
Right, and growing healthily. It just happens to shift the mix, but I think the quarter-over-quarter that we saw is probably more just kind of shipment, as much shipment as anything else, I think, in the short term.
So, you know, the final question I was just going to ask you is kind of just an open-ended question. That is, you know, as you talk with investors, you talk with myself and others, is there any attribute of the Arista story that you feel is not understood enough or maybe asked about enough? You know, because, you know, everybody's focused on AI, you know, but is there, in that context, some things that you just think people don't pay enough attention to?
No, I mean, I think the story is, is pretty well understood. I think the, you know, the power of having kind of these two pieces of the business, you know, people focus on AI and on cloud, which is great, and, you know, that's a very important and they're very important customers to us, and we want to do as much as we possibly can with them. But then the offset of kind of having this enterprise campus business, I mean, it is very, over time, it can become a very healthy offset, those two pieces of the business, be it at gross margin line, be it at kind of a, a growth, offsetting some of the cyclicality. So I think that piece, and we need to continue to execute on that, and I think we've been making progress.
But if we can really do that right, having those two pieces of the business kind of as an offset to each other, really does help the model overall.
Perfect. I think we'll, we'll leave it at that. Ita, thank you so much for joining us.