2017 Highlights Q1

Copyright © Arista 2017. All rights reserved.Copyright © Arista 2017. All rights reserved.

Arista in Q1 2017

Copyright © Arista 2017. All rights reserved.

Safe Harbor

2

This presentation and the accompanying oral presentation contain forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to management. Forward-looking statements include all statements other than statements of historical fact contained in this presentation, including information concerning our business plans and objectives, total addressable market, potential growth opportunities, market potential by speed, trends relating to increase in storage, the router market, competitive position, benefits of Arista’s platforms, industry environment and potential market opportunities.

Forward-looking statements are subject to known and unknown risks, uncertainties, assumptions and other factors that could cause actual results, performance or achievements to differ materially from those anticipated in or implied by the forward-looking statements including risks associated with: Arista Networks’ limited operating history; risks associated with Arista Networks’ rapid growth; Arista Networks’ customer concentration; Arista Networks’ dispute with Cisco Systems, Inc. including the issuance of any ITC remedial orders prohibiting the importation of Arista products (or components thereof) into the U.S., Arista Networks’ ability to obtain a determination that alternative product implementations are not covered by such ITC remedial orders, any penalties assess by the ITC if Arista does not obtain such a determination and Arista Networks’ ability to manage our manufacturing and supply chain including the sourcing of components on commercially reasonable terms, if at all; risks associated with our customer’s adoption of our redesigned products and services; requests for more favorable terms and conditions from our large end customers; declines in the sales prices of our products and services; changes in customer order patterns or customer mix; increased competition in our products and service markets, including the data center market; dependence on the introduction and market acceptance of new product offerings and standards; rapid technological and market change; the evolution of the cloud networking market and the adoption by end customers of Arista Networks’ cloud networking solutions; Arista Networks’ dispute with OptumSoft; and general market, political, economic and business conditions. Additional risks and uncertainties that could affect Arista Networks can be found in Arista’s Annual Report on Form 10-K filed with the SEC on February 17, 2017, and other filings that the company makes to the SEC from time to time. You can locate these reports through our website at http://investors.arista.com and on the SEC’s website at www.sec.gov.

You should not rely upon forward-looking statements as predictions of future events. Although our management believes that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances described in the forward-looking statements will be achieved or occur. Moreover, neither we, nor any other person, assume responsibility for the accuracy and completeness of the forward-looking statements.

This presentation is being provided as of May 4, 2017 and the forward looking statements and any other statements contained herein speak only as of the date of this presentation, and we undertake no obligation to publicly update any forward-looking statements or any other statements in this presentation for any reason after the date of this presentation to conform these statements to actual results or to changes in our expectations, except as required by law.

In addition to GAAP financial information, this presentation includes certain non-GAAP financial measures. The non-GAAP measures have limitations, and you should not consider them in isolation or as a substitute for our GAAP financial information. There are limitations to the use of non-GAAP measures. Non-GAAP gross margins and non-GAAP operating income exclude the impact of stock-based compensation expenses, expenses associated with the OptumSoft and Cisco litigation, and other non-recurring charges or benefits. See the Appendix for a reconciliation of all non-GAAP financial measures to their nearest GAAP equivalent.


Inevitable Shift to Seamless Cloud Networking

3

1970 2008 2010 2012 2015 2017-2020+

10s1,000s

10,000s

50,000sClient Server

High Performance Computing

Leaf-SpineCloud Networks

Software Defined Cloud Networking

Cloud Native Containers

Seamless PICS*

100,000s

Number of ServersLow Latency

Dedicated Networks

Wire-speedNon-Blocking

VirtualizationIP Storage

Zettabytes of Storage100,000s+ of Servers

1,000,000s of VMsConvergence of PICS

ContainerizationMulti-tenant

*PICS – Places In the Cloud


Cloud vs Enterprise – They are Different Networks

4

Traditional Networking (Legacy) Cloud Networking (Arista)

Serves <100,000 employees Serves hundreds of millions of users

Expensive to build and scale 10x-40x more cost effective

Minimal API usage API for programmatic access

Manual management Automated management

1 Admin: 100 servers 1 Admin: 10K servers

Proprietary lock-in Open


$0

$5

$10

$15

Arista’s Cloud Networking Opportunity

5

Source: Dell’Oro Market Research, Ethernet Switch Update, January 2017

Server Shipments Data Center Ethernet Switch Revenue

0%

50%

100%

Enterprises/Premises

Cloud and SP

Perc

ent o

f Ser

ver S

hipm

ents

Reve

nue

in $

Billi

ons

Rest of Market(Enterprise and SMB)

Rest of Cloud

Top 7 Cloud Providers

• Enterprise workloads are migrating to public & hybrid clouds• Traditional enterprise served 100,000 employees vs. Clouds @ hundreds of millions of users• The emergence of cloud native apps & containers necessitates a new architecture

Telco SPs


Arista Market Share vs. Cisco

6

High Speed Data Center Switching Market Share in Ports (10GbE and Higher)

Source: Crehan Research Datacenter Switch Market Share Report Q4’2016.Note: Excludes blade switches.

3.4% 4.9%

6.7%

9.3%

12.0%

14.5%

73.3% 71.4%

70.8%

66.1%

60.7%

52.0% 52.0%

54.0%

56.0%

58.0%

60.0%

62.0%

64.0%

66.0%

68.0%

70.0%

72.0%

74.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%

2011 2012 2013 2014 2015 2016

Arista

Cisco


Market Potential by Speed

7

$0

$5

$10

$15

1 GE

10 GE

Software

40 GE> 100 GE

50 GE*

25 GE*

Data Center Ethernet Switch Revenue ($Bn)

Source: Dell’Oro Market Research, Ethernet Switch Update, January, 2017

*Shows discrete 25G or 50G ports only. Majority of 25/50GE server ports are expected to connect via QSFP-100G break out to 100 GE switchports at the large Cloud Service Providers.

Reve

nue

in $

Billi

ons


Cloud-Class Market Leadership Platform Portfolio

8

Diverse Merchant Silicon Architectures

Single-Image Arista EOS Across All Platforms

7500E/R Series

7150, 7160 & 7280R Series7050X/7060X Series

LeafEOS

7300X Series

Spin

e/Sp

lineTM

Leaf

Volume Value


Proven Arista EOS Architecture Flexibility

9

12 Silicon Families

4 Architectures

One Single EOS

Consistent and Open

Bali

Alta

Petra

Arad

Jericho

Trident+

Trident-II

Trident-II+

Tomahawk

Tomahawk+

Helix XP80

Fulcrum-FM BRCM-DNX BRCM-XGS CAVIUM-XPA

Arista EOS

Automation & Programmability Telemetry

Cloud Networking

Abstraction Layer


Arista’s Cloud Scale Software Architecture

10

Processes are Self-Healing

Legacy – Spaghetti Code Arista Programmable EOS

Susceptible to Process Failure

OTV MSDP PIM IGMP

IGMPSnoop

CoPP

ISISEIGRPOSPFRIPBGP

STP

ACL

U4RIB U6RIB

IPQOS LCFIB

Custom Linux Open Linux

Custom ASICs Merchant Silicon

Publish

Notify

Scalable

Resilient

Programmable

• Arista has ONE Operating System, purpose built for the cloud


Universal Cloud Network Architecture

11

Core is subsumed in Spine

Access

Distribution

Core Switching

Legacy Core Routing

Optical

DCIInternet DCIInternet

Spine

Leaf

EW

Universal Spine

DCI

Transit Peering

Spine

UniversalLeaf

Internet Inter-DC WAN

Universal Leaf-SpineLeaf/SpineLegacy


Arista’s ‘5 A’ Architecture

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Any Cloud API

Analytics

Automation

Available Architecture

Agile Work-X

Datacenter

DCI MPLS WANInternetPublic Peering

DANZ

Savings with faster migration and integration between private and public clouds

3x

Opex savings using single pane of glass for network automation and analytics into public & private cloud

10x

Cost savings using same operational model for public

and private cloud

5x

Seamless Workload Mobility

Best-of-Breed 3rd party Technology Integration

Network State Streaming & Telemetry

Universal Cloud Architecture ANY Workload, Workflow, or Workstream

Cloud Visibility & Telemetry

Open Cloud API Integration & AutomationCloud Orchestration

Private Cloud Public Cloud

BranchOffice


Foundational High Availability and Resiliency

LEAF

SPINE

NETWORK

SPINE Smart System Upgrade – (SSU)• Maintenance mode• Dual SUP SSO with NSF• MLAG Active/Active L2 SSO

LEAF Smart System Upgrade - SSU• Hitless Software Upgrade• MLAG Active/Active L2 SSO

CLOUDVISION ADVANTAGE• Automated network wide change

controls, including upgrades and rollback

EOS

EOS SOFTWARE ARCHITECTURE• Multi-process state sharing architecture• In-service software patching • Software Fault Containment (SFC) • Stateful Fault Repair (SFR)

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Arista EOS Evolution

EOSArchitecture

StateProgrammability

History of Rich Innovation in Extensible – Open – Scalable

2004-2009 2010-2012 2013 2015 2016 2017+2014

EOS Automation

Workflow VisibilityCloudVision®

Workload AutomationEOS SDK

EAAS

EOSHigh Availability

SSUASU

SFC/SFR

VXLAN IntegrationNSX Integration

OpenStack IntegrationEOS+

EOS Scale

EOS Architecture

NetDB

FlexRoute™CV Telemetry MSS SecurityAlgoMatch™

Leaf-Spine CloudMLAG/ECMP/BGP

LANZ/DANZ TelemetryZTP/R

VM Tracer for vCenter

EOSCloud Designs

EOS2017

DANZ 2017Hybrid Cloud

Containerization

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Arista EOS Supports Many Roles• We target a large and growing market, $10B+ in 20171

• Our open software approach is applicable to new opportunities• EOS software is our foundational building block which drives TAM growth• Arista has a proven ability to insert and drive sharp share gains• New applications drive higher revenues with major accounts

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SPINE DCIFLEXIBLE WAN LEAF

CLOUD PEERING EDGE

MONITORING SECURITY MSS

IP STORAGE BIG DATASPINE ROUTING

1 Dell’Oro Ethernet Switch Data Center Forecast, January 2017.


Disruptive Cloud Economics for Routers

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Interface Types

100G Density

Software Features

Power(per 100G port)

List Pricing(per 100G port)

Legacy & Ethernet Ethernet

~80 Ports 432 Ports

~200+ watts 25 watts

$100,000+ $3,000

Legacy feature sets

Cloud-optimized Routing, FlexRoute Scale,

Programmable Traffic Engineering

Traditional Router Arista 7500RSpine

7500R disrupting router market w/100GbE routing transition

Arista’s Disruptive Economics


Next Gen Telco Cloud

Routing Use-Cases - Arista Universal Spine & Leaf

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DC Universal Spine Content Provider

Internet Inter-DC WAN

SpineCore

DCI

Transit Public Peering

Cloud DC Content Provider

Peer D Peer E

Peer C

Peer F Peer G

Peer H

Private WAN

Software Driven Traffic Engineering Service Provider NFV

Cloud DCI Peering and Interconnect

Path computation

IGP, BGP - Segment Routing

MPLS TE signaling

ProgrammaticAPI’s

DC2

DC1

Segment Routing reduces complexity and improves scale by offering intelligent source routing with globally optimized traffic engineering

WAN

x

Inter-DC Traffic Arista 7500R Universal Spine

Arista 7280RUniversal Leaf

Deep Buffer Leaf-Spine Architecture

SDN Controller

WAN CoreConsumer and Mobile Access

x86

VNF

VNF

VNF

Services Edge

UniversalSpine

Spine

Leaf


Migration to Cloud Storage Architectures in the Enterprise

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Traditional EnterpriseStorage

CloudStorage

Transforming Storage Networking

$5/GB ~ 36¢/GB(2-3¢/GB/month)

-6% CAGR + 22% CAGR

Scale-up Scale-out

Siloed Fibre ChannelSANs

Common IP/EthernetInfrastructure

Sources:Cost: Global Financial CustomerCAGR: Crehan Research Inc, April 2016

Sources:Cost: AWS, MSFT Azure List pricesCAGR: Wikibon Server SAN Research Project 2014

Cost per GB

Market Growth

Scaling

Architecture


Arista’s IP Storage Solution

19

Dedicated Storage Spine(Large)

Storage Spine

App ServersApp Servers IP Storage

Compute Spine

Hyper-converged Storage Racks

(Small)

Hyperconverged Storage/Compute

Dedicated Storage Rack(Medium)

App ServersApp Servers IP Storage

Scalable to Petabytes

Lossless Transport

High Availability Visibility Simplified

ManagementReturn on Investment

Smart System Upgrades, Self-

healing OS

Deep Buffering, VOQ,

DCB/PFC

UCN Architecture, Dense switching

Tracers, State-streaming, Telemetry

CloudVision provisioning and

Change Management

Low power consumption, compact form

factors

Storage Partner Ecosystem


Arista’s Containerization

20

Run containerized apps on EOSCommon development

environment

Network Visibility into containerized workloads

EOS running in a Container, as a packaging option

Common development environmentFlexible platform support

Designed for DevOps and MicroservicesContainer

TracerContainerized EOS

(cEOS)Containers

on EOS New


Cloud Networking is Everywhere: Three Key Segments

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Enterprises

Turnkey Driven

§ Compute, Storage, Security Tech Partners

§ CloudVision Turnkey§ Solution Driven§ Virtual Branch Leaf

Arista Cloud Converged

Titans

Scale and Control Driven

§ 25/50/100GbE Scale § Internal Projects§ API controls§ Spine & HA§ EOS Leaf for Control

AristaCloud Scale

Key Verticals

Best of Breed Driven

§ Leaf-Spine Switching§ Spine Routing§ UCN Designs§ Best of Breed

Platforms§ Highest EOS

Preference

Arista CloudClass


Major Verticals

22

Note: By Billings. Only selected verticals shown. Diagram not to scale.

79%

21%

U.S. International

Moderate

Large

Follower Early AdopterPace of Adoption

Financial Services

Tier 1, 2, 3 Service Provider

Cloud Specialty & HostingProviders

Rest ofEnterprise

Cloud Titans

Retail

Government

Oil & GasBusinessServices

Manufacturing

ResearchLabs

Healthcare

Education

Media &Entertainment


Foundational Technology Underpins TAM Expansion• We partner with customers and follow their journey• EOS software drives repeat purchases, Arista cultivates customer advocacy• EOS software organically enables additional use cases

23

Chart illustrates the top 15 customers based on the last 12 quarters of total product and service billings.

Additional Purchases

Did Not Purchase

Top 15Customers

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Customer1

Customer2

Customer3

Customer4

Customer5

Customer6

Customer7

Customer8

Customer9

Customer10

Customer11

Customer12

Customer13

Customer14

Customer15


1 Amounts are non-GAAP except for Revenue; refer to reconciliation between non-GAAP and GAAP in the appendix.24

Financial Highlights1

Note: non-GAAP, excludes stock-based comp.

196 218 245 242 269 290 328 335$0

$50

$100

$150

$200

$250

$300

$350

$400

Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

Millions Total Revenue

65.8% 65.5% 64.0% 64.4% 64.1% 64.6% 64.4% 64.2%

0%

10%

20%

30%

40%

50%

60%

70%

Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

Gross Margin

27.6% 27.3% 29.1% 28.9% 27.9%

30.0% 32.3%

30.2%

0%

5%

10%

15%

20%

25%

30%

35%

Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

Operating Margin

0.54 0.59 0.80 0.68 0.74 0.83 1.04 0.93$0.00$0.10$0.20$0.30$0.40$0.50$0.60$0.70$0.80$0.90$1.00$1.10

Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

Diluted EPS

Copyright © Arista 2017. All rights reserved.25

Balance Sheet & Cash Conversion Cycle

135 147 210 253 209

51 50

67 71

56

0

10

20

30

40

50

60

70

80

$0

$50

$100

$150

$200

$250

$300

Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

Milli

ons

AR and DSOARDSO

84 118 162 236 287

3.6 3.5

2.7

2.2

1.7

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

$0

$50

$100

$150

$200

$250

$300

$350

Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

Milli

ons

Inventory and Turns

InventoryTurns

12798

133

177

228

0

50

100

150

200

250

Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

Cash Conversion Cycle

(R)

762 824 800 868 1,043$0

$100 $200 $300 $400 $500 $600 $700 $800 $900

$1,000 $1,100

Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

Milli

ons

Cash, Cash Equivalents & Marketable Securities (R)


Arista in Q1 2017

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Mission:Deliver the best cloud networking solutions for private, public and hybrid cloud deployments

Containerized EOS (cEOS) supports alternate models of procuring, packaging and deploying Arista’s EOS® across cloud, enterprises and service providers.

Arista Data ANalyZer DANZ 2017 R-Series Universal Leaf and Spine platforms support improved visibility to 25G and 100G networks. DANZ combined with Arista CloudVision® delivers hyperscale visibility securing today’s cloud centric applications and workflows.

Continued adoption of Cloud Networking across key verticals.

Q1’17 Revenue: $335.5M

Q1’17 EPS: $0.93*

Q1’16-Q1’17 YOY Revenue Growth: 38.5%

Q1’17 Gross Margin: 64.2%

Q1’17 Operating Margin: 30.2%

Key Highlights Financial Results (non-GAAP)1

1 Amounts are non-GAAP except for Revenue; refer to reconciliation between non-GAAP and GAAP in the appendix.* Diluted shares increased to 77.5M vs. consensus at 75M due to adoption of ASU 2016-09. This reduced non-GAAP EPS by $0.02


Legal Status – 2017 Timeline

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Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

944

945

944CBPHearingFeb.13

944CBPDecisionApril7

945IDDec.7

945FDMay4

944IDJune20

944FDSept20

IPRs

IPRHearingMarch7

IPRFWDJune11

Endof945PRPJuly3

2017 Highlights Q1

Investor Relations

Transcript of 2017 Highlights Q1