Welcome to the second day of our conference. Hopefully, you had a great breakfast. Today, I'm very pleased to host, and I'm not saying it just to say it, but I really mean it, the most favorite CEO in my universe. We sometimes argue, but it's always coming with a lot of respect to one another. Thank you, Jayshree. Jayshree Ullal, CEO of Arista, and Todd Nightingale, COO of Arista. I've known Todd for many years from his days at Cisco, and then Arista, that I took public, and now at Arista. We're going to have a discussion for about 45 minutes. I'll try to keep it tight for about 40 minutes or 35 minutes, and let you ask questions if you have any questions. The discussion, as you know me, I'm not a quarter guy. It's not about the quarter.
The discussion is really the value of Arista, the sustainability of trends. We do have a spending cycle in the industry with hyperscalers, and through the spending cycle, there are changes to the architecture, there are changes to the network. Customers are deploying certain technologies and we want to go into it. The purpose of this session is really to understand the core value of Arista. With that, last quarter, you raised the full year guidance from 25% to 28%. I remember when we looked at your guidance, I'm talking about a year ago, when you look at your guidance, and I told investors, these numbers don't make sense. They're too low. The industry is growing faster. The company, if you take out this and you look at this, it's supposed to grow faster. The question is, what drives the growth?
I know this is a soft question to start our discussion. What drives the growth right now, and how sustainable is what we're seeing in the past few quarters?
First of all, Tal, you're my favorite too. There's not too many investors who we can say I know for decades. That kind of times both of us a little bit. If I start talking about mainframes, it'll really time me a little. Coming back to the growth vectors for Arista, as you know, Arista really made networking sexy again, and part of that was focusing on those growth vectors. We pioneered the leaf-spine architecture, and we really redefined or reimagined networking for the cloud. Right? As you know, we power some of the world's largest cloud titans, as we call it, with this leaf-spine architecture that was different than the standard blocking, loss-oriented enterprise architecture. Today, one of our growth vectors continues to be the cloud customers.
A lot of our growth in the last decade came from what I call the front-end network, the more visible network where we were connecting to compute, storage, WAN, building the active-active leaf-spine, et cetera. In the last three years, we really had to study the back end of the network that was historically built through proprietary technologies like InfiniBand. The first thing we set to work on was really defining Ethernet for those use cases. We now call it AI fabric, scale up, scale out, scale across, scale up within a rack, scale out between racks, and scale across between data centers themselves. That's really going to drive a huge part of our growth. Now, with me is, of course, Todd Nightingale, our President and COO, and you know he reimagined the campus and enterprise in some of his prior assignments.
I think there's another one coming there as well. That'll be a huge vector of growth for us, where post-COVID, the campus looks very different from the carpeted buildings, and you really need a uniform experience, client to branch everywhere. I think the AI and campus are going to be our fastest growing segments. That doesn't mean the others don't grow, but they grow slower.
Yes. When we look at hyperscaler spending, it's up giant this year, was up giant last year.
Yeah.
When you talk to them about their build-out plans, and how sustainable is the cycle? What needs to happen for this cycle not to be just one or two years or three years, but rather a long-term cycle?
Yeah. It's just a really good question because even I get scared. I look back at our '99/2000. That was a short-lived cycle, as we all know. It started out as a great burst of Y2K and then collapsed. I think the biggest difference here is there is a very sustainable advantage for AI, both networking for AI and AI for networking. It's going to traverse not just the hyperscalers, but go into the newer clouds and enterprises as well. That's one. We haven't yet seen all the killer agentic AI applications yet. That's just beginning. I think this is a multi-year, in fact, a multi-decade cycle. Now, having said that, some of this CapEx is just stunning to me. We never thought of CapEx in the trillions, let alone billions, back when we started this.
It's important to understand, though, that the CapEx has many pieces to it, the biggest one being compute, power, and obviously all the real estate itself, the cooling, the chilling, the buildings, et cetera. Networking is a small piece of it, but becoming a very strategic piece, meaning I can't let these compute nodes idle. This is where we really come in, because in the past, you could have a bit of underutilization, overutilization, oversubscription, it didn't matter. Here, this idle CPU cycles is idle money, right? The ability for this CapEx to continue growing, I think is high just because. It's not only the large hyperscalers, there's a force multiplier of others coming into it with the neo clouds and enterprises. I think it's sustainable as far as I can see, which is generally not more than two, three years.
I think this is a transformation, much like the Industrial Revolution or the internet revolution.
Yeah.
Now, will it have its valleys and peaks and highs and lows? Of course. Newton's laws of gravity means nothing just goes up to the right. There will be some ups and downs, but overall, it will still go up and to the right.
When it comes to your position, the market is expanding, meaning we started with four hyperscalers, then Oracle, then neo clouds, now a lot more second-tier clouds. Talk about your position, market share, but not the numbers, rather your position as the market expands to other areas outside of the big hyperscalers.
Yeah. I think, first of all, if you look back at 2022, our AI position was outside looking in. We were seeing all these GPUs built by Nvidia connected largely by InfiniBand. Our position was zero. Interesting thing even back then is customers were asking us for our thought leadership because we were building these proprietary backends. Today, I would say, three or four years later, our position with the top titans, hyperscalers, or even some of the tier 2 cloud providers is medium to high. There's still existing networks to deal with. You've heard me often talk about four out of four, or in the past was four out of five. We now have production. We went from trials to pilots to production in all these four major ones.
Having said that, there's a whole lot more to do there now, because largely, we were looking at production networks that are scale-out, connecting all of these scale-up technologies. We have the opportunity to not only expand scale-out, particularly with the advent of OpenAI defining multi-planar technologies with MRC, but also to scale across, because more and more power is a real issue. It used to be a niche DCI data center interconnect use case. The power of routing, multi-tenancy, SRv6 and tunneling the process, encryption, working with coherent optics is going to expand how we build those scale-out networks, scale across networks. Scale-up is a new market for us, largely today deployed by PCI Express and NVLink switching.
With the Ethernet for Scale-Up Networking, ESUN coming out as a spec this year, I think you're going to see a lot more action on that within a rack as well.
Much more hardware intensive, much more latency, much more defined for high-speed training as well as inference, job completion time to first token is all important over there. This market is multiplying to multiple use cases and is frankly redefining the data center as we knew it.
Right. By the way, Todd, I have some questions.
Oh, yeah. You will get your day in the sun.
I want to first finish the hyperscalers, and then we'll get to the important stuff.
We'll get to campus.
When we look at the hyperscale environment, over the last few years, there was white boxes penetrated to the market. Some companies started with it, Amazon and then Google, and even existing customers migrated and expanded the use of white boxes. As the market goes up to scale up and scale across, talk about your position in this market versus white boxes. Does it mean that, again, I'm thinking about conceptually, not about numbers, if the market shrank in the last few years because of white box competition, is the market going to expand again for you now with scale across?
I think the market never shrank, by the way.
Right.
Our total available market has gone from $50 billion to $105 billion.
Right
is our stated number now. I think by 2030 it'll be $160 billion.
Yeah.
There's no shrinking in our market. In the market, there's always segmentation. Anybody build their own PC these days? Anybody build their own iPhone these days? Great. You are the candidates for a white box. If you're going to look to build something ultra-cheap, don't need a lot of features. We have always coexisted with white box. We will continue to, because there's a sort of cost-effective do-it-yourself mindset that will require that. Now, with AI, it's actually scary because you don't want all your AI traffic to be going through across something you do yourself. We're actually seeing less white box in AI installations and more branded vendors like Arista, like Nvidia. That doesn't mean it doesn't exist.
It does exist when a hyperscaler or customer is jointly trying to develop something at the scale-up level and design their own board and almost virtually give it to a CM who can build it like a white box. It ends up being a joint engineering, not so much do it yourself, but manufacture it with a CM type of mindset. That's going to continue to exist. Low software, high hardware, highly defined, different margin profile, typically 20%-30%. Low software content. We've always coexisted with that. It's been with us. I can remember the IPO when we were two, three billion in market cap 2014, where the first question would be, "How are you going to compete against the white box?" As you know, we've coexisted and not only competed, but in many cases they've chosen us over.
There is a new concept that's emerging for us called the Blue Box, which is hardware and building very, very reliable, high signal integrity hardware is a nontrivial effort.
What we are seeing now actually is the resurgence of a Blue Box, where more and more customers are not only requiring Arista for the high-level software, but for the low-level software. We're building a lot of diagnostics at the power supply level, counters, active components, passive components. This is what we've done for the last 10, 15 years because we have fantastic partners in Broadcom and other switch suppliers. They build great chips, but we build the software to twiddle their chips. We literally remove the software development kit of our chip vendors and put in our own network diagnostics and platform-level software. We think a Blue Box, which is basically a white box better designed for mission-critical applications, will also factor in, and is factoring in.
Got it. I have many more questions for you, but I don't want him to be bored. Todd, you joined recently. What's your mission statement? What are you focusing on? I mean, recently.
I'm almost a year in.
I know. Recent in Arista-
He doesn't like it that I call him a newbie.
When you look at the tenure of the length of position of the other managers, you're a recent addition.
That's true. I'm an infant on our team.
You're an infant, yes.
I think really, my mission comes in twofold. One is to ensure that the operations at Arista are smooth, that we're always able to deliver to customers that need it and supply everything worldwide. The second, and I think maybe what's most important when we talk about driving growth, is fundamentally bringing the mission-critical differentiation that Arista has to every network. We spend a lot of time talking about the hyperscalers, and that's an incredibly important part of our business. Arista's always stood for mission-critical networks, the most reliable, most available networks in the world. And five years ago, even 10 years ago, when we spent a lot of time talking about it, there was a divide between people who needed mission-critical and the nice-to-have networks.
Yeah.
I don't think that exists anymore. Everyone, every network, every enterprise network is mission-critical right now, and my goal is really to bring Arista to every enterprise network.
How do you make the campus business grow bigger? What are the challenges in campus that you don't see in enterprise, in data center enterprise? What do you need to do in order to make it, as Jayshree said, a giant business, a big business in the future?
Yeah. I think the first is that the breadth of the portfolio goes far beyond switching. It's why we've spent so much time investing in the rest of the network. Seven years ago, Arista invested heavily in the PoE switching and launching our campus network. That was fast followed by Wi-Fi, and then just recently, in fact, the day I joined, Arista acquired VeloCloud. That brought in a missing piece with the SD-WAN technology, which really completed the portfolio. We had enterprise routing, switching, both spine and leaf, all of the Wi-Fi, and now SD-WAN to really attack the branch. That's the first. Bringing that portfolio into the Arista world and really delivering with differentiated quality the way we always do, that is the mission we're on right now. In fact, we've got the leadership here who's driving that.
I think that the second piece is looking at the universe of customers. The enterprise data center and the hyperscaler data center, the amount of customers that make up the big chunk of that market are relatively small, maybe the Global 2000, et cetera. Campus networks span a much larger group.
We're working very hard right now to evolve the go-to-market to be able to reach all of that TAM, not just in the U.S. but around the world. That expansion to the whole market go-to-market effort is key.
Elaborate on this. What do you need to do with the go to market in order to address the broader market?
Yeah. I think one really interesting piece is the thought leadership. We've seen this, I've seen this even in my one year at Arista, exploding the amount that we see Arista being publicly part of the conversation. In campus especially, this has been a huge focus, including the exposure that we need from experts around the industry. Just a couple of weeks ago, the most recent Gartner Magic Quadrant came out, and for the first time, Arista was in that leaders quadrant, which has opened up already so many doors because people, of course, look at the leader quadrant there.
I just want to take a moment to congratulate. It took us seven years to get there. We went from being a niche vendor to a visionary and finally the leadership. By the way, we're the youngest kid there. Everybody else has been around 25- 40 years. We entered the market five, over five years ago, right? Congratulations.
There's a great graph that shows the trajectory year-over-year.
The question is, what's your value proposition? Meaning, what do you bring? How do you disrupt the market? What do you bring to the market that is different than what the others are offering?
Before he answers that, can I tell a story about it?
Yeah.
Okay. You'll know the value proposition answer. About seven years ago, we were in a room like this with 100 customers. Most of them were data center customers. I said, "How many of you think we should get into the campus?" 30% of them raised their hand and said, "We are tired of all this other software, spaghetti OSes. We want the uniformity. We want what you brought to the data center, to the enterprise." I said, "What about the other 70% of you?" They go, "Oh, no, we don't want that because you'll get distracted, and you won't give me a good experience in the data center or AI or whatever, right?" Fast forward two years later, they were like, "Where are your campus products?
You're late." There was a burning desire to bring the same stability, availability, reliability, analytics, automation, software-defined capabilities into the campus that we brought to the data center. Over to you on the differentiators.
Yes. I mean, you have a great CEO. She has a feature-
You can make your message so loud.
We are in a world right now where the entire industry is focused on exactly how quickly they can execute security patches across-.
Yeah
their portfolio. With every other vendor, they're looking at five or six or eight different OSs, different types of software that have to be patched and upgraded, et cetera. Arista, it's one.
Right.
And the same-
Can I tell another story on that?
Yes.
When the Project Glasswing happened, and there were 10 vendors invited in, little Arista wasn't in that 10 vendors. It was Microsoft, Anthropic, Google, JP Morgan, Bank of America, I'm sure, were in there. Everybody said, "Where is Arista?" Because they were expecting us, because this vendor again, has the least vulnerabilities and the most robust operating system to be there guiding them. We didn't ask to be invited. We were pulled in, literally, to help solve an industry-wide problem. That's kind of our role in this silent network, I guess.
Yeah. It's a moment in time when every IT shop is staring down this enormous challenge of other vendors.
Yeah.
Five, 10 different versions, but Arista is one. That's enormously powerful, demonstrating the value of quality and reliability, and not just the availability of their apps and their client connectivity, but how we got there through this diligence year after year, decades after decades of sticking to this.
Yeah
core strategy. The second piece beyond just reliability is looking at sort of the future of how AI and agents are going to manage these networks. EOS has incredibly powerful data platform. In fact, it turns the whole network into a single observability fabric with complete state streaming. Every single state stream across the entire network being fed into our cloud, which means that our AI agents are built on the best possible platform, and that is already being seen by users. That differentiation has years and decades of future ahead of it. It's really built on the shoulders of giants. It's the state streaming, it's the analytics that are used by hyperscalers, that are used by the biggest data centers in the world being brought into the campus space. It's awesome, and the response is already great.
A question for both that was referenced on the last conference call is you spoke about decommits of supply chain.
It's a word that haunts me now.
Yes.
I actually went and looked it up in the dictionary to make sure I got it right. Just for terminology, when Todd is running this worldwide manufacturing organization, he puts in a request with silicon suppliers, optics, CPU, memory, often it's 52 weeks ahead of schedule. This is why you see our purchase commitments now at $8.9 billion. There's usually a promise date they give us, just like we give a promise date to our customer. The definition of a decommit or recommit is when that date moves.
Yeah.
We've had a lot of dates move, and that's disconcerting because when their date moves, our date moves to our customers, right? It changes the lead time. Nobody in the industry can tell you that they don't have this problem, or if they do, they're an ostrich in the sand, and they're not admitting there's a problem. Second thing I would say is, this is a two-year industry problem. I'm not saying it's a two-year Arista problem. I'm saying it's at least two-year industry problem, and those that are stronger and can plan better and do things ahead of time are the winners. Obviously, we're going to not sit for two years and feel bad about the situation. We're actively acting on it. The memory situation was horrendous last November. We've gotten ahead of it. We're paying top dollar.
It's going to affect some of our margins while we still stay in the band of 62%-64% gross margin like we've advertised. We dealt with it. We will deal with it, and we will come out of it just like we did COVID, the lawsuit or this one. It's no fun for the industry, and in my view, the strong will get stronger.
I'll just add, there's surging demand right now, and we see from our customer base upside and upside on the forecast, and that means we have to push on the supply chain to be able to serve that, to be able to drive material needed. This industry phenomenon, it's just how much upside can we deliver on?
Yeah.
I mean, it's putting pressure on it for sure.
Two years ago, one year ago, we spoke about memory supply constraints. What's the situation on supply constraints now? Did it expand to other areas? What other areas? Talk about the environment and what is the gating factor for you to grow faster.
Let's just get the timeframe. That memory situation was like four months ago. Things are moving quick. Things are moving quickly. It's going to be across the technology space. We see these capital budgets coming down the pipe that are enormous. People are building out massive data center capabilities around the world. It's not just memory. It's going to be in the wafers and the silicon, not just in the high-end silicon. We see it in power ICs. We see it in compute and CPUs. We're starting to see surging demand on the CPU as well as the GPU side. A lot of these roads lead back to the same advanced process fabs in Taiwan.
There's only really one vendor there.
Right.
When roads lead back to TSMC, there's going to be capacity constraints.
I think even there, the shortages are really not just at the wafer level but at the substrate level. What's happening is the material shortages here, as you start to build more complex processes with chip-on-wafer, then you got to build fab capacity for two nanometers, three, five, seven. We still have older processes that we need addressed, right? It's sort of an across-the-board material shortage that pops up like a game of whack-a-mole. First it's memory, then it's, like you said, optics, CPUs, PCBs, you name it. Holistically addressing this so that we can ship a product in time has been a challenge. Having said that, I just want to be super clear on one thing. We're going to do everything to solve these problems in quarters, not in years.
Any delays we have this year doesn't mean our orders or our customers go away. It just means we have to address it next year.
Yeah. Got it. One question, I want to understand it conceptually. Deferred revenues grew substantially in the last few years. It's a reflection of the environment. How does it evolve going forward? I explain what I mean by that. I don't mean orders. I mean, what happens when a big customer finishes to build a data center? Because these are giant data centers, what should we expect with deferred revenues? To step down and revenue jump when someone finishes a data center? Is there a smooth kind of line to the deferred?
Yeah. That's a really good question. Again, history is always an indicator of what might happen in the future, so I'll just look at some history first. We had a cloud super cycle back in the 2016 through 2018, where deferred wasn't as big, neither was the CapEx. It was easily 10%-15% of our revenue, because people were putting in new cloud data centers. Our products were new. They were going through 100 gig back then, super cycles. Sometimes it was a use case in the leaf, sometimes it was in spine, and sometimes it was in the edge. This went on for three, four years. Then right around 2018-2019, when COVID happened, all these use cases became more mature.
COVID just put a lot of things into standstill, but you actually saw our deferred not only go flat but pretty close to zero in that timeframe. I'm not saying we'll go close to zero, because this is a much larger number and there's more shock absorbers. You can expect that deferred, which is at an, in my view, all-time high right now, will start to slowly flatten as these use cases become mature, as the products become mature, and there'll be this gap between new AI centers and old AI centers. I don't expect deferred to remain at elevated levels forever.
Right.
Eventually, they'll come out as revenue, and as the cycle matures, it'll be a new set of use cases, maybe in scale up or scale across. I think we are at an all-time high now. It could get higher or lower, but I think more likely it'll flatten.
Got it. Another question I had, which is very specific about a single customer, but you disclose it. You disclose that Microsoft is your largest customer. Last year they did not do Ethernet. I mean large scale, right? They did mostly InfiniBand. This year they are. They don't use white boxes. You are their vendor. The interesting part is when I look at your disclosure, they grew 26% without having you in the back end. In the front end, they grew 26%. What happens this year? Meaning, what happens when you start to see Ethernet deployment in the back end, and what happens to the front end? Is there a parallel growth in the front end as well?
Yeah. This is a question you keep asking that I've never done full justice to answering, which is like, "Hey, if you're growing in AI, why is your core business not?" I think it's important to look at these things not across quarters or even a year.
Yeah
Across multiple years, right? As you rightly pointed out, in that particular hyperscaler, but in general, a lot of upgrades were going on in the front end between 2022 and 2025, right? Today, if the customer has a dollar, they're not refreshing the front end as fast. Guess what they're doing? They're putting all their investments in the back end.
That doesn't mean it'll last forever, because once they finish the back end, they're going to put pressure on the front, right? You got to do another upgrade cycle there. There's this sinusoidal wave where when the back end goes up, the front end doesn't so much, and when the front end goes up, the back end doesn't so much in a particular use case.
Right.
You multiply that times the number of customers, you get the picture. When you see our front end slow down, it means they already built it or they're focused elsewhere. By the way, there was a period of time where they were neither focused on back end nor front end. They were just getting GPUs from Nvidia, right? That was the largest bill they had to pay for. I think if you look at it over a period of time, it all evens out. If you look at it at a point of time, I remember saying at one time that the front end today is two to one over the back end.
Yeah.
I have to correct that statement now, because now it's looking more like one to one because our back end is growing so fast.
Got it. The question is also there is a cycle, and I don't know how to refer to it, but there is also a cycle of technology at the semiconductor level.
Yeah.
When Broadcom releases a new chip, right, like Tomahawk 6, is it a tailwind or a headwind? Does it give opportunities for new players, white boxes? Because you're so close to Broadcom, does it give you the tailwind to actually grow even faster? What happens upon release of new technology?
I think any new technology tends to drive a benefit to Arista.
Yeah.
Specifically because Ethernet, as a standard, is becoming the de facto standard, especially.
Yeah
in scale-out, but in the rest of the market as well. As Ethernet continues to demonstrate leadership in the space, Arista becomes the natural choice. We lead the standards. We drive the state-of-the-art around that. As we've seen this kind of rapid advance from 800G to 1.6T, we're starting to even look at 3.2T. You've got people looking at the capabilities that that provides and really considering building out faster and faster data centers. It just opens up more and more TAM and, if anything, accelerates Arista growth.
Got it.
Yeah.
Just to add to that, I completely agree with Todd. I think the beauty of our business is, while we're going to enter this 1.6T refresh cycle, we've still got an awful lot of 400G and 800G going on as well, right?
Yeah.
It's not like they died and it's either/or. We're actually seeing the benefit of a double cycle where one speed is taking off at 400G/800G, and then you're layering upon, since I like desserts, a multi-layer cake, and the 1.6T comes on top of that. It's definitely an accelerator.
Yeah
to the overall speed refreshes we're going through.
I want to ask you about the part of the number that we don't talk about, and I'll explain it in a second. We talk a lot about hyperscalers. We talk a lot about campus. If I remove these two from your numbers, there's a 40%, 50% in the middle, and that is enterprise data centers. I have the luxury of covering both software and networking. In the last cycle that we're seeing now, I'm seeing the early bird that enterprises are investing in AI cybersecurity. That is the prerequisite for investing in the network, because you have to invest first in cybersecurity. Palo Alto reported it yesterday, Fortinet before. You can see clearly AI is a driver for cybersecurity. The question I have is, from your guidance, this part of the network doesn't grow that much. Less than historical, that's part of your conservatism.
I will say, I will add to you, in line with historical numbers, 5%, 7%. What happens in the future? What happens to enterprise data centers? What are the drivers? You're greatly positioned there. Is there a market share discussion even? It's not about the market share, it's about market growth.
No, no. Jayshree mentioned this cyclical-
Yeah
nature of the spec. As people start to shift, maybe big focus onto AI, then the traditional data center might slow that year and then back. There's enormous growth opportunity here in two ways. Number one is we continue to see ourselves picking up significant use cases, specific important franchises across existing customer base in the enterprise. No doubt about that. There are parts of this market that we have yet to reach. Arista is a market leader here, but we still have an enormous amount of TAM that we can go after, and we're seeing growth internationally. We're starting to see big university wins. We're continuing to pursue the big kind of traditional financial wins. The verticals that we are starting to penetrate in real ways are amazing. Manufacturing, retail, university, et cetera, and these are big data center buildups that are important.
This kind of pursuit of the enterprise data center continues, and I know it's easy for it to get overlooked, but there is enormous opportunity. We're still reaching the rest of the market.
We're gaining enterprise logos. We're definitely gaining enterprise market share. As you already know, we're the number one in high-performance switching. I think we have to be patient about it. It doesn't happen as fast. We don't get the instant gratification we do in the cloud and AI cycle. Think about it, an enterprise data center is building, and then it's usually a depreciation or a usage of that data center for at least seven years, eight years, nine years. Even if they put the wrong technology in, we got to wait, right?
Yeah.
We do best in greenfield situations. We do pretty well in brownfield situations. We don't do as well in legacy risk-averse situations where the enterprise customer's just going to sit there with their assets and sweat it out for a while. You see all three.
Yeah.
I think over the long term, and as you know, Arista has been built with our software and hardware excellence brick by brick. This brick shall come, too. It's just not the first few stairs.
Yeah.
It'll come a little bit later.
Got it. I want to talk about competition. 10 years ago, we spoke about competition with Cisco. We don't talk about it anymore because there's nothing to say. The question is competition with Nvidia, because we do see Nvidia growing in networking. Can you articulate how you compete with Nvidia?
Yeah. Well, I think it's one of those classic co-opetition issues where we're very grateful to Nvidia because our AI business is almost always tying in to, 80% of the time anyway, into Nvidia GPUs. There's no way they're a competitor to us in the compute space. The more compute capacity they deploy, the more we can do with networking. Obviously, there's a tendency to build a vertical stack with Nvidia and there have been many examples of customers where the customers want to go with a horizontal best-of-breed network from Arista, but end up going with Nvidia because the customer gets a better bundled strategy, better support, better availability of the GPUs, et cetera. There's a natural part of the TAM that's just not available to us because it's an Nvidia vertical TAM.
Yeah.
Having said that, again, we got to be patient here because I think today it's largely Nvidia GPUs, but we're very excited about the other AI accelerators that are coming on, both in training and inference. It hasn't gone unnoticed that we love the TPUs and the Google architecture that started way back in 2017, and naturally, we have a lot of opportunities to connect directly or indirectly to it. AMD and the MI series is, again, we have deployed a lot of successful networks already together, and every customer is looking for an alternate accelerator strategy. There's a whole range of inference accelerators that are coming out. You guys saw the Cerebras IPO, many of them are being built in-house by the hyperscalers, which is again, giving us a lot of rack opportunity.
We love Nvidia when we connect to their GPUs, but we love all the accelerators and frontier models to give us that diverse one network for all the diverse XPUs, if you will.
The one thing I might add there is, there's also the story of building standard-based networking.
Yeah
Time after time after time has been an area where open standards have won the day eventually. We're seeing that across the board. Nvidia has some Ethernet technology available as well, but Arista leads the way. We lead the way in the standards. We lead the way in pushing the limits of the technology. In the fullness of time, I think that becomes a driver for us.
Right. If I try to divide the market between GPUs of AMD or others and between GPUs of Nvidia, do you think you have higher market share when the GPUs are not Nvidia, when it's something else? The reason why I'm asking it is because that part of the market is actually growing very fast.
Yeah. The short answer to that is yes.
Yeah.
There is no vertical bundling going on. There is a best-of-breed approach over there. Arista is naturally the first and often only choice.
Yeah.
There's so much risk in this deployment. The last thing they want to do is go explore some speculative things.
Yeah.
Yeah, it is the fastest growing market for us as well.
Got it.
When we get off of the Nvidia GPU, the scale up part of the market becomes available.
Right.
Right? That is a whole piece of the AI space we don't play in.
Right. Okay, my last question. I don't leave much time for Q&A, but I wanted to cover it. Optical integration. Your competitor, Cisco, does have an optical capabilities in-house. What is your philosophy, first of all, about optical integration, owning assets versus partnering with assets, and take it from there.
Look, our philosophy is definitely to work with the best-of-breed optical ecosystem. We don't have to own all pieces of it. There's a lot of physics there, as you know, and there's a lot of technology with lasers and co-packaged optics. Andy and the team introduced our LPO, which is the latest and greatest for pluggable optics for 1.6, 3.2T. We are big fans of optics because wherever we sit, we have to connect to them, right? It wouldn't come as a surprise to you that we worked very closely with Acacia before Cisco acquired it.
Yeah.
Continue to. They're a good coherent optics vendor for sure. We see them. Having said that, I think Arista's position is not always to be the revenue provider or the product provider for optics, but integrate into their optics really well, which can be integrated into our boards in some cases, or work with pluggable optics and provide the right MACsec and root cause analysis work for them, including managing all of that capabilities. Because that is such a specialized best-of-breed type of companies, just like security.
Yeah
We don't pretend to be that, but we want to enable that at a system level.
Great. Sorry, I took most of your time, but is there any question from the audience? Do we have a microphone? No. Good.
Well, you took all their questions, Tal.
I know.
Thanks for coming for the first early morning session here. Appreciate it.
Yeah. Thank you, Jayshree.
Okay.
Todd, thank you.