Arista Networks, Inc. (NYSE:ANET) Q1 2023 Earnings Call Transcript

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Operator: Your next question comes from the line of Erik Suppiger with JMP Securities. Your line is open.

Erik Suppiger: Thanks for taking the question. Can you speak at least qualitatively about how much backlog you’re using up at this point? And how long do you expect to continue working down backlog orders on a quarterly basis?

Ita Brennan: Yes. I’d love to talk about backlog, Erik. I don’t think we’re going to do that. Look, I think it all comes back to lead times, right? The lead times is the driver of all else, right? We had , customers had to place orders to those lead times. As lead times improved customers started to shorter lead time, that will slowly kind of navigate our way back to a more normal visibility window and lead time window right. I think we’re taking the first steps of that now, right? But that’s going to take time to get there. But that’s what will happen as lead times will naturally bring visibility back to something more normal. But that’s going to take some time. We’re in the very beginning of that.

Erik Suppiger: Is that a multiyear process?

Ita Brennan: I don’t know when we’re back to normal. It will take time to get there.

Jayshree Ullal: Yes. We’ve pretty much said it will take us the back half of 2023. So, I think normal is early next year.

Erik Suppiger: Okay, thank you.

Operator: Your next question comes from the line of Simon Leopold with Raymond James. Your line is now open.

Simon Leopold: Thanks for taking the question. Just a quick one. If we could get a metric, the RPO value. And in terms of my question, it does seem as if you’ve had a number of announcements around some software capabilities around your campus and enterprise-focused products. And it feels like you’ve sort of built up a critical mass. I’m wondering how you look at that strategy in terms of its maturity and its readiness in terms of the software behind the campus portfolio, if there’s anything still missing? Thank you.

Jayshree Ullal: Yes. Thanks, Simon. I think most of our software is not stand-alone software. It’s bundled either in CloudVision or EOS. There’s very few stand-alone pieces, of course, as the MDR and the DANZ Monitoring Fabric. Specific to the campus, I would say they tend to look at it more as a solution where they bring in wired, wireless, they want an automation framework with CloudVision. They want some security capabilities. In RSA, we announced some of the missing gaps we filled. Historically, we’ve partnered with other vendors for Network Access Control and Arista introduced its first one. I’ll talk about it more next quarter. But I think some of the gaps we are now starting to fill ourselves. But in the campus, it always tends to be a combination of platforms and software never stand-alone software alone.

Simon Leopold: Yes. The RSA announcement was actually, sort of where my question was coming from. It felt like that was in my mind, maybe one of the final gaps, and that’s what I’m really trying to understand here.

Jayshree Ullal: Yes. I was going to save this for next quarter, but I’ll just give you the condensed version is the Arista Guardian for network identity, Agni, means fire in Indian language, Sanskrit. So, we’ll spread some of the ice with our fire.

Simon Leopold: Sounds good. And just the RPO value, do you have that handy?

Ita Brennan: Yes. I think it’s up about between 50 million to 60 million quarter-over-quarter. It did pick up a little bit on the software and services side, but not in that range. Still small numbers, a long way to go, yes.

Simon Leopold : Thank you.

Operator: Your next question comes from the line of Sami Badri with Credit Suisse. Your line is open.

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