David Vogt: Great. Thanks, guys, for taking the question. I just want to follow up on Simon’s question, maybe put it a little bit differently. So, if I think about your market sector trend update, how much of the shift to that 40% to 45% cloud and AI titans reflects the inclusion of new AI use cases going forward and the shift of Oracle combined with maybe some normalization at Meta and Microsoft? Can kind of help us think through the dynamics there? And if it looks like shares going to be unchanged with the enterprise and financials, does that suggest to you that those markets are going to grow comparably over the long-term across the cycle? Is that the right way to look at it? Thanks.
Jayshree Ullal: Yeah, David, your analysis is really deep on this one. Let me just say how innocently we reported this, which is Oracle is a greater than $1 million installed server company right now. And both their cloud spend as OCI and AI is significant, both as a company and for Arista. But we’re not making any assumptions and that will vary every year, of course, on the mix of Microsoft or Oracle or any other for that matter. We’re simply saying AI is going to become such an important component of all our cloud types that it’s now a combined vertical. Don’t read too much more into it.
Ita Brennan: Yeah, it’s more of a forward-looking impact, to be honest. Historically, this doesn’t really change the trends that we’ve been talking about previously. It’s really more about the future and how do you think AI will impact these numbers going forward.
Jayshree Ullal: Yeah, AI is too small to impact as much right now, it’s right, you know that. But as it starts to become important, then this combined will go north of the 39% we have normally forecast.
David Vogt: Great. Understood. Thank you.
Operator: Your next question comes from the line of Erik Suppiger with JMP Securities. Your line is open.
Erik Suppiger: Yeah, thanks for taking the question, and congrats. I know you don’t want to talk about backlog, but can you give us a sense at what point or what time you think your book to bill will return back to 1 or greater than 1, or when will your lead times reach normalized level? And then I have a quick follow-up after that.
Ita Brennan: We’re definitely not going to talk about book to bill if we don’t talk about backlog, Erik. So, look, I think honestly we’re making improvements. Jayshree talked about how lead times are much improved, right? So, we’ll continue to do that. That’s a positive thing for the customers and for the business. And we’re still not back to kind of the turn business that we had some time ago. We’re making progress, but we’re still out there.
Jayshree Ullal: I’m very — I just want to add that I’m very proud of the progress the team has made. When you look back a few years ago, we were short of components, we were making multi-year purchases. There was a risk of a very large exposure, because you can’t get all these forecasts right. And then obviously the mix changes from time to time, especially with the cloud and AI. So, it’s very hard to measure our business on book to bill and backlog at a given time. But if you have to look at it as an overall multi-year trend.
Erik Suppiger: Can you comment then on just when will the lead times be at a normalized level?
Jayshree Ullal: Yeah, and I think we said this. It’s been improving consistently and we expect it to be normalized just like our gross margins in 2024.
Erik Suppiger: All right, very good. Thank you.
Liz Stine: Operator, we have time for one last question.
Operator: Your last question today comes from the line of Woo Jin Ho with Bloomberg. Your line is open.
Woo Jin Ho: Oh, great. Thanks. I made the cut. Happy Halloween, folks. So, I think there was a mention on merchant silicon earlier in the Q&A. And one of your merchant silicon partners has actually moved up the stack towards a surface provider routing. I’m just curious if there’s any intention on going after that piece if that chip is made available to you?
Anshul Sadana: Sure. Woo Jin, I believe you are referring to the latest announcement at Broadcom on their 25.6T Jericho chip that was announced recently.
Woo Jin Ho: Yeah, the Qumran3D.
Anshul Sadana: Qumran3D, exactly. So, it’s the same family, same features. And as you know, we’ve been a great partner of Broadcom for a long time, and we’ll continue to build new products. This is not a new entry, so to speak. We’ve been building these products that can be used as switches or routers for a while, and the bandwidth just doubled going to now 25.6T. You can expect some products from us in the future with those variants as well, but really nothing really changes. Just innovation continues and merchant silicon continues to succeed.
