Data Center Infrastructure

Arista's Q3: Smooth Not Lumpy With the Cloud Titans

Microsoft loomed large on Arista's third-quarter call Thursday afternoon as analysts asked -- and asked again -- just how big of a "cloud titan" Redmond is for the data center switch vendor.

Arista Networks Inc. CEO Jayshree Ullal and CFO Kelyn Brannon kept reiterating that Microsoft Corp. (Nasdaq: MSFT) is the major "cloud titan" data center customer for the company. "We only have one 10% customer and that's Microsoft," said the CEO.

The company reported another good quarter Thursday with revenue up 53% year-on-year but the analysts were clearly picking at how having one major customer might affect sales if the situation changed. (See Arista Stock Jumps On Meteoric Growth.)

Ullal mentioned that Arista had seen some "lumpiness" in the first quarter. The first quarter is typically Arista's worst and the fourth its best.

"It would not surprise me in Q4 to once again [see] some lumpiness... it may not be one particular titan; it could be a different one," Ullal said.

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"Other cloud titans, these are not as large as Microsoft but they are definitely growing equal or faster," she said later in the Q&A session.

Nonetheless, the Arista execs expect Microsoft to continue to be a "10% customer" in 2015.

Arista has four main areas of its customer base: high-tech enterprises, financials, cloud titans, and service providers. Eighty-one percent of its sales are generated in the Americas, 14% in EMEA, and 5% in Asia-Pac.

Ullal said that the strength of its sales in its home market is overshadowing growth overseas and the company is working to change that mix over time.

"We expect to see the fruits of our labor in the next one to three years," the CEO says.

For the quarter, Arista reported revenue of $155.5 million, up 53% year-on-year. Net income came in at $28.1 million, doubling up on the $14 million reported a year ago. Arista's earnings per share of 40 cents beat analyst estimates by 12 cents.

— Dan Jones, Mobile Editor, Light Reading

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