Elongated lead times for Arista's hottest networking gear won't likely improve until at least the final quarter of 2020 at the earliest as the supply chain continues to recover from COVID-19.
This was according to company executives fielding questions from Wall Street analysts who had jumped on a conference call last night to discuss Q2 numbers for the three months ended 30 June.
Revenue dropped 11.1 per cent year-on-year to $540.6m: product was down 17.8 per cent to $421.4m; services were up 25 per cent to $119.15m. Pre-tax profit came in at $175.2m versus $220.6m and net profit dropped 23.5 per cent to $144.79m.
Back in the first quarter, Arista said lead times on its biggest sellers had doubled. Last night CEO Jayshree Ullil said: "In terms of manufacturing, we are still experiencing inventory issues. We have very long lead times, where we have improved. We are improving them, we look to improve them, but we don't expect it to be back to normal until probably Q4."
She added: "As we review 2020 at the midyear point, there are clearly macro issues outside our control. The number of confirmed COVID-19 cases has increased sharply in July. The economic recession is looming and trade wars are escalating. Despite this, Arista experienced a cloud titan recovery and enterprise strength in Q2, offset by extended sales cycles in the campus sector."
Roughly 40 per cent of turnover was generated by sales to cloud titans, 35 per cent came from enterprises including financial services, and the remainder was smaller specialist cloud providers. Just 19 per cent of total sales were outside of the US, down from 21 per cent last quarter.
The Cognitive Campus portfolio reached the $100m sales milestone, the CEO said, and "depending on market conditions" could reach $200m in the next five to six quarters.
For Q3, Arista forecast revenue between $570m and $590m, down on the $654.4m it reported for the same period of 2019. Chief financial officer Ita Brennan said the outlook was unpredictable.
"We continue to closely monitor the impact of COVID-19 around the world. Local operating restrictions remain in flux and it is unclear when and how these restrictions will finally be resolved. While we made good progress on supply chain and manufacturing during the quarter, we still have some work to do to slowly return to normal lead times.
"Our guidance for Q3 reflects our current understanding of COVID-19 and its impact in our business and supply chain. This is, however, an inherently uncertain situation and we will need to continue to monitor and attempt to mitigate new challenges as the situation unfolds." ®