Arista Networks (ANET) Q2 2023 Earnings Call Transcript

For the period ending June 30, 2023

July 31, 2023 4:30 p.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Welcome to the Second Quarter 2023 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.

Ms. Liz Stine, Arista's Director of Investor Relations, you may begin.

Liz Stine

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 second quarter ending June 30, 2023. 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 third quarter of the 2023 fiscal year, longer term financial outlooks for 2023 and beyond, our total addressable market and strategy for addressing these market opportunities, including AI, customer demand trends, supply chain constraints, component costs, manufacturing output, inventory management, and inflationary pressures on our business, lead times, product innovation, working capital optimization, and the benefits of acquisition, which are subject to the risks and uncertainties that we discuss in detail in our documents filed with the SEC, specifically, in our most recent Form 10-Q and Form 10-K, and which could cause actual results to differ materially from those anticipated by these statements. These forward-looking statements apply as of today and you should not rely on them as representing our views in the future. We undertake no obligation to update these statements after this call.

Also, please note that certain financial measures we use on this call are expressed on a non-GAAP basis and have been adjusted to exclude certain charges. We have provided reconciliations of these non-GAAP financial measures to GAAP financial measures in our earnings press release.

With that, I will turn the call over to Jayshree.

Jayshree Ullal

Thank you, Liz, and happy last day in July, everyone. We delivered revenues of $1.46 billion for the quarter with a non-GAAP earnings per share of a $1.58. Services and software support renewals contributed approximately 15.2% of revenue. Our non-GAAP gross margins of 61.3% was influenced by improving supply chain overheads and higher enterprise contribution. We do expect gross margins consistently improve every quarter this year and stabilize in 2024.