Arista Networks, Inc. Q1 FY2020 Earnings Call

· Earnings call transcript and AI-powered summary

Arista Networks Q1 2020 Earnings Summary

Quarter Overview
  • Q1 2020 revenue was $523 million, at the low end of guidance and down 12 percent year over year. The prior-year quarter included $83 million of deferred revenue recognition, inflating the prior period comparison.
  • Non-GAAP EPS was $2.02, down 12.6 percent year over year, primarily reflecting the revenue decline.
  • Non-GAAP gross margin was 65.6 percent, slightly above Q4 2019’s 65.2 percent and above guidance, helped by favorable software/services mix and some sales of previously reserved inventory.
  • Service revenue increased to 21 percent of total revenue, compared with 19 percent in Q4 2019.
  • International revenue represented 23 percent of total revenue, down from 25 percent in Q4 2019.
Business and Sector Performance
  • Cloud Titans were Arista’s largest vertical in Q1 (approximately 40 percent of mix), enterprise second (approximately 35 percent), and providers (service provider plus specialty cloud) third (approximately 25 percent).
  • Cloud Titans: Stable overall performance; strength seen among certain customers, offset by caution or declines among others. The company now expects cloud titan revenue for the full year to be roughly flat versus 2019, an improvement from prior “flat to down” expectations.

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Operator: Welcome to the First Quarter 2020 Arista Networks' Financial Results Earnings Conference Call. During the call, all participants will be in a listen-only mode. After the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time. [Operator Instructions] As a reminder, this conference is being recorded and will be available for replay from the Investor Relations section at the Arista website following this call. I will now turn the call over to Mr. Curtis McKee, Director of Corporate & Investor Development. Sir, you may begin. Curtis McKee: Thank you, operator. Good afternoon, everyone, and thank you for joining us. With me on today’s call are Jayshree Ullal, Arista Networks’ President and Chief Executive Officer; and Ita Brennan, Arista’s Chief Financial Officer. This afternoon, Arista Networks issued a press release announcing the results for its fiscal first quarter ending March 31st, 2020. If you would like a copy of the release, you can access it online at our website. During the course of this conference call, Arista Networks management will make forward-looking statements, including those relating to our financial outlook for the second quarter of the 2020 fiscal year, longer term financial outlooks, potential impact of COVID-19 on our business, industry innovation, our market opportunity, the benefits of recent acquisitions, and the impact of litigations, which are subject to the risks and uncertainties that we dis

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