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

But analysts examine how reliant the data center switch company is on 'cloud titan' Microsoft as its major customer.

Dan Jones

November 6, 2014

2 Min Read
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.

Learn more about developments in SDN and virtualization at Light Reading's data center infrastructure channel.

"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

About the Author(s)

Dan Jones

Mobile Editor

Dan is to hats what Will.I.Am is to ridiculous eyewear. Fedora, trilby, tam-o-shanter -- all have graced the Jones pate during his career as the go-to purveyor of mobile essentials.

But hey, Dan is so much more than 4G maps and state-of-the-art headgear. Before joining the Light Reading team in 2002 he was an award-winning cult hit on Broadway (with four 'Toni' awards, two 'Emma' gongs and a 'Brian' to his name) with his one-man show, "Dan Sings the Show Tunes."

His perfectly crafted blogs, falling under the "Jonestown" banner, have been compared to the works of Chekhov. But only by Dan.

He lives in Brooklyn with cats.

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