Release Date: February 18, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Arista Networks Inc (ANET, Financial) achieved a record revenue of $7 billion in 2024, surpassing initial guidance with nearly 20% growth.
- The company reported a strong non-GAAP operating margin of 47.5% for the year.
- Arista Networks Inc (ANET) continues to gain market share in high-performance switching, achieving over 40% market share in 100, 200, and 400 gig ports.
- The company has successfully expanded its 400 gig customer base to approximately 1,000 customers in 2024.
- Arista Networks Inc (ANET) is optimistic about achieving its AI revenue goal of $1.5 billion in 2025, with significant contributions from AI back-end clusters.
Negative Points
- International revenue contribution decreased to 16% in Q4 2024, down from 17.6% in the previous quarter.
- The gross margin in Q4 2024 was slightly down from the prior year, influenced by a mix of business and China tariffs.
- Meta's revenue contribution was lower in 2024 due to a decrease in their CapEx, impacting Arista Networks Inc (ANET)'s revenue.
- The company faces challenges with the stalled deployment of one of its AI clusters due to delays in GPU availability and funding.
- Arista Networks Inc (ANET) anticipates variability in inventory due to the timing of component receipts on purchase commitments.
Q & A Highlights
Q: Can you discuss the timing and rollout of AI back-end switches and whether next-generation GPUs are a gating factor?
A: Jayshree Ullal, CEO, explained that Arista is committed to four out of five AI clusters, with three customers expected to roll out a cumulative 100,000 GPUs this year. The transition from InfiniBand to Ethernet is ongoing for one customer, with production expected next year.
Q: How do you view the impact of white box vendors on AI networks, particularly in back-end networks?
A: Jayshree Ullal, CEO, stated that Arista coexists with white boxes, especially in AI leaf and spine networks. The AI spine is generally 100% Arista-branded EOS due to its rich features and capabilities. Differentiators include real-time analytics, congestion control, and smart system upgrades.
Q: Can you elaborate on the Cloud Titan numbers, particularly regarding Meta and other Cloud Titans?
A: Jayshree Ullal, CEO, noted that Meta's 2024 numbers were influenced by their 2023 CapEx, which was down 15% to 20%. All Cloud Titans are performing well, and Microsoft and Meta are expected to remain strong customers in 2025.
Q: What is driving the gross margin outlook for 2025, and does it imply a significant Cloud Titan mix?
A: Chantelle Breithaupt, CFO, confirmed that the gross margin outlook is mix-driven, with some absorption of China tariffs. The mix of business, particularly with Cloud Titans, influences the margin.
Q: How do you see the evolution of speed deployment, particularly 400G, 800G, and 1.6T, in 2025 and beyond?
A: Jayshree Ullal, CEO, explained that speed transitions are accelerating due to AI. 2024 was the year of 400G, with 800G expected in 2025-2026. The transition to 1.6T is anticipated around 2027, contingent on new GPUs and bandwidth demands.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
