Arista Networks, Inc. (ANET) Earnings Call Transcript & Summary

Great. Thanks, [indiscernible]. My name is Alex Henderson. I'm the Needham security networking analyst. It's a pleasure to have Ita and Liz here. Ita Brennan is the CFO, the Liz Stine is IR. And we're going to do a fireside chat. And if you want to ask a question, there's a dialogue box, you can type it in there, and I will report it on to management at any time from the get-go all the way through to the end. And you can also e-mail me at [email protected]. I can keep my e-mail up and keep an eye on it for that. Having said that, welcome, guys.

Good to be here.

Thanks, Alex.

So wow, probably the best thing I can say. I thought your Analyst Day was probably the most interesting Analyst Day we've seen in a really long time. And I really appreciate all of that great content. But I thought maybe we'd just start off with a little bit of a history around where you are in terms of the last couple of years' worth of outstanding performance. And then what you said on the Analyst Day in terms of your expectations for not just the fourth quarter, I think you gave that on the prior guide, but out into '23.

Yes. No, I think -- look, we've been benefiting from some very healthy demand across the business really, right? I mean we saw you've seen kind of the benefit of some of the cloud. Cloud is definitely back. You've seen some reacceleration in cloud spending. We talked about cloud being as much as 45% of the business for this year coming off of kind of 30% in the prior year, right? That's one piece of the business where you've gone from somewhat stable, lower investment levels and growth and investment to kind of a recovery with the 400 gig product cycle heading into kind of back end of 2021, heading into 2022. And having that overlaid with a very constrained supply environment, giving us some good visibility to kind of what's happening in their business, at least within those supply-constraint windows, we had 6 to 12 months. It's kind of the period of time that we can -- that we have that visibility. I think across the rest of the business or the enterprise has continued to execute very nicely for us. You saw that 30% CAGR in the enterprise business, that continues over time. We have been constrained from a supply perspective there, but certainly on a demand perspective, we've seen that business kind of outperform that 30% that we had set kind of coming into the year. So we're very pleased about that because there's a lot of effort that's gone into kind of building that enterprise business to continue to build that enterprise business. And you can see that it's giving us kind of the opportunity to add products and add capabilities to satisfy kind of that enterprise part of the business end to end. And some of the kind of exciting new announcements were around, honestly serving those enterprise customers. So I think good strong demand across the business, supply constrained. We're assuming we'll still be supply constrained, honestly into 2023. We talked about a growth rate of 25% for 2023. And that is still a supply-constrained number as we think about the business heading into next year.

So just to put that in some context, '21, you grew 27% in '22, given the kind of the midpoint of the guide, you're around 45%. Even more impressively, our product growth, 30% in '21 over 50% in '22. That's -- last quarter was 67% growth in product sales, [ all small ]. Those are really impressive numbers -- can you talk a little bit about why you think 2023, you're able to do a 25% type growth rate again, which would imply product sales somewhat above that. I assume the services don't accelerate to that level.

Yes. I mean the services probably continue to grow somewhere in the mid- to high teens kind of rates. I think is our view. So product does continue to grow healthily in our minds. And again, we're fortunate to have more visibility kind of into the business at this point than we've had in a long time, right, just because of the supply and because of the supply constraints, right? So it's not that 2023 is completely filled in, but you do have deployment schedules for a good chunk of the year, and that certainly helps give you confidence around the growth rate. I think the underlying drivers for all of this is still kind of a cloud business that's recovering from some underinvestment and looking to kind of deploy the new products and new technologies. Remember, we have new 100-gig products, new 200-gig products, you have 400 gig products that are being deployed into that. And I think on the enterprise side, you really have much more reliance on the network across enterprise customers and the solution is really resonating with those enterprise customers, right? All of the simplicity of what we were doing for the cloud with CloudVision as a management tool on top of that is resonating really well with enterprise customers that are now more reliant on their networks than they've been in the past, right, whether you're a health care customer or you're a retail customer or your commercial manufacturing. Everybody has more reliance on their tech, right, especially coming out of COVID. And they're really looking for ways to kind of manage that better. And I think we're bringing some really interesting kind of solutions with CloudVision and with some of the capabilities that the team talked about at the Analyst Day to make that easier to make that more manageable to make that more efficient.

So looking at the longer-term viewpoint of the company, you guys exposed a view of artificial intelligence adoption within the cloud that I think it was a very powerful and accurate read on things. So I think the way you described it was that if you think about AI, it's 10 to 30x per asset intensive than traditional applications. The world is aggressively moving to it. I think about just one company I follow like CrowdStrike, adding trillions of events from their enterprise customers to their cloud petabytes a day of volume going to their cloud data lake as a good example of what you're talking about. But at the end of the day, if that's accurate, I think the depiction was in comparison to AWS when AWS launched with Compute in 2006, then in 2010, -- you launched the AWS launch the storage piece, and that was a massive inflection point in growth for public cloud, resulting in now a $60 billion company here today with a $105 billion backlog according to their Qs. But you're prescribing 2023 is that similar type of inflection point as we move to AI technologies. I know you're the CFO, but this is a big deal. If that's accurate, that strikes me as probably one of the most profound changes in the environment that we've seen in a long time and could set you up for a series of very good years as they build out that infrastructure.

Yes. So you're going to get the CFO's view. You just tie -- I mean, to me, this is obviously a fundamental trend, right? I mean, AI is going to drive demand for compute and connectivity well into the future. And it has underpinned -- we've always had these conversations with these customers about the fact that over time, their investment in the network is going to continue to grow. And one of the reasons why it's going to continue to grow is obviously AI and the use case is that you can -- the vacant solution in all different areas of activity around that, right? Some of what we're shipping today is kind of -- is a building block in that AI evolution. And there will be more for sure, and we're doing everything we can to participate in that, right? There's a technology element to that, which is can you solution more of what they need with the Ethernet and with capabilities. And that's very much fits in our pattern of kind of looking for new use cases with these customers, where we can expand what we can do for them and benefit from that over time, right? So I think it's not that there's a light switch that you're going to turn on and everything is going to change overnight. But this is something that will underpin their investments. And then if we do a good job from a technology perspective, et cetera, can increase where we can participate, and it's one more use case for us to drive with these customers.

Well, it's more than just a use case. It's a major use case -- it's a huge change in the world environment if that proves to be accurate, and the intensity of the infrastructure. So is it fair to say that, that theoretically could really drive a very rich period of growth in the cloud arena?

Yes. I mean I think, look, there's a bit of a chicken and an egg to this thing, right? And we saw this kind of with the convergence of switch routing as well, right? The more economical you can make the deployment of the capacity, then the more capacity gets deployed, right? So for sure, the demand for connectivity and compute is going is astronomically higher. But then obviously, there will be compression and pricing and everything else, and there'll be technology compression in that as well. But it definitely under over time, a good kind of future investment cycle. How it plays out quarter by quarter, year by year, we'll have to see, but it does underpin kind of continued investment in the network.

How important is the software element of your thrust into enterprise? Obviously, we're talking about AI. You guys are bringing AI and the optimization of the user experience, combined with sharply lowering the costs associated with operating the infrastructure that the enterprises use with the AI as a driver of it with CloudVision and the like. How important is that as a leading-edge tool to win additional market share from the incumbents in that world.

Yes. I mean I think it's hugely important as a differentiator but also as an enabler for enterprises to really -- if you think about a cloud company and the resources they have kind of to run a cloud-like architecture. What we're trying to do is give tools to the enterprise so they can run their own cloud in a similar way. Liz, I don't know if you want to kind of contribute to that from a technology perspective, et cetera.

Yes. I think that, especially when you're talking to the enterprises about EOS and CloudVision right, EOS was built upon kind of that state database that holds the state of the entire network device. Moving forward, we built kind of CloudVision, which was on an aggregate of all the states. So that had the network state. And then last year, you heard that we announced our NetDL, which is expanding this to kind of third-party applications and centralizing all that data within the enterprise network. And if you have all that data, you can do some really interesting things. And I think you kind of alluded to the AI that we're running on top of kind of these enterprise networks, if you look at AVA, which we've -- was part of our Awake acquisition that's running on top of that data set in order to detect network anomalies so that we can alert you when something is happening across your enterprise network that is not normal, right? This is the way that we can do detection, network detection and response. So there's some really cool things that you can do once you have that aggregate set of data. And I think that you'll see use cases come out as the enterprise realizes how valuable that data set really is.

So it sounds like that architecture, which is driven off of our uniform kernel, which is not the case with your large competitor, gives you a competitive advantage that is sustainable for the long term in delivering better performance, less downtime, less -- all the values that you get in the cloud when you think about a cloud operating environment where you've got a 1.5 miles long building being run by 10 people, that is certainly widely different from what most enterprises look like. So that's the primary driver of it and it's highly sustainable. It's not a speeds and feeds world anymore, right?

Yes. I mean, EOS certainly has -- that base architecture, that's hard to replicate, right? And that's taken a long time to kind of through multiple evolutions to get it to where it is today, where you can really start to use that data set to provide visibility, provide monitoring capabilities that you could have in line sensors, security sensors, monitoring traffic in the network in a unique way, right? So there's -- can it be replicated? I mean, sure, but it's going to take time, and it's not for want of trying on the part of other solutions, but there's still something very unique about how EOS and that's particularly the collection of that state was architected as pretty differentiated.

So when I think about the company's structure today, you've got a couple of years of spectacular growth. You've had some pressure on gross margins simply as a result of the supply chain issues -- but you still managed to deliver operating margins up in the 40% range. Not too long ago, you were talking about a 30% to 35% kind of operating margin and now you've kind of reset that a little bit. Can you talk about the degree to which if you continue to grow at the 15% to 30% range that you would be able to produce leverage on that? Or would you be able to just sustain it? Or would you see margin compression as you hire to catch up with the investments that you're making?

Yes. I mean I think we're benefiting right now from accelerated top line growth with somewhat constrained OpEx growth and hiring growth, right? So you kind of have the world of where the top line was outperforming and the market for talent, et cetera, was pretty constrained, right? And so that's what's getting you kind of this fall through to the bottom line on an accelerated cloud number, honestly, in spite of the gross margin pressure. I think as you think about going forward, I mean, we do want to continue to invest in the business, both on the R&D side and the sales and marketing. We believe there's lots of organic opportunities you saw in the kind of expanded TAM and some of the -- what's in front of us from a business perspective. So we do want to invest and kind of grow resources. We will seek to hire in the software kind of -- on the software side as much as we can. And if there's an opportunity kind of in this market going forward, we will be there, and we will execute against that, right? Same on the sales and marketing side, we're continuing to kind of grow the sales and marketing team in a pretty disciplined, structured manner, but we do want to continue to do that as well, right? We talked about 40%, plus or minus for 2023 and reserving the right that over time, right, if there are investments that we can make that help to support and continue to grow into the future that we would do that with kind of a 38% plus or minus operating margin as a longer-term target.

So the company has a lot of cash on the balance sheet. You've done a number of acquisitions. Is it reasonable to think that you're still active on the acquisition front and have prices gotten more reasonable so that you can do them at a more reasonable price in this environment? Or you've done a number of acquisitions, do you need to integrate those and enroll some of that together before you bring in more complexity.

Yes. I mean I think what we've done to date has been very, I would say, adjacent, and it's been somewhat tuck-in, somewhat technology based, right? So we've acquired kind of some technology capabilities around wireless or around visibility around the security and monitoring piece with the [ wake ], all things that are very adjacent and focused on the network. We've acquired some really good talent that's come with that and expanded kind of our security kind of knowledge and understanding with that team, right? So I think that's -- those are things that -- there's a lot of cultural alignment in terms of the folks that have come on board and the products are still very adjacent. We have to integrate them. We have to integrate them into CloudVision. So there's work that has to be done there. But it's very kind of aligned with our core product set and what we're trying to do. So I think we'll continue to -- you should expect us to continue to look for opportunities like that. We get the question all the time. Are there larger acquisitions that you could do? I mean we'll look at that, too, but it's been -- to date, it's been hard to see opportunities that we can get high confidence around that truly fit with kind of what we're driving the business and the opportunity that's there just organically with some -- maybe with some tuck-ins, is significant and executing against that is lower risk than a higher outcomes. I think that's where the focus has been.

So from a perspective of cash position, you're building a pretty nice cash of cash. This is a lot of cash on the balance sheet. We're approaching $10 a share. How do you see that if you're not doing larger acquisitions, it's -- you're generating a lot per quarter.

Yes, I think -- look, we have been returning cash, and we'll continue to do that. We -- obviously, we've used the cash, and this is one of the reasons why I think we will carry a larger cash position as we have had the opportunity to use it competitively over time, right? Historically, we've used it kind of some of the litigation and other stuff. Right now, we're using it kind of as a -- help us drive purchase commitments and be able to kind of be aggressive in terms of supply. So we will probably always carry a larger cash balance. But we're also returning cash to shareholders, and we'll continue to look at that as we unravel some of the supplies up here, that can become cleaner. We can set maybe some more structure around that, but we will definitely continue to return cash.

So I'm pretty sure your inventory on your balance sheet has gone up quite significantly. I don't remember the exact numbers, but I want to say it was in the vicinity of 100% over the last year and almost 200% over the last 2 years. You've also extended significant purchasing commitments, which when I take the inventory together with the purchasing commitments, it strikes me that larger than your cost of goods sold out into the ’25, '26 time frame. So how do I reconcile the scale of those purchasing commitments and inventory built with that kind of long-term outlook. Is there any risk that you have to back off any of that or have any liability on some of that inventory getting long in to? Yes. I mean, look, I think we -- the inventory piece itself, yes, it's grown, but it's grown. I think the turns are down a little bit, but it's not significant and then it's just been growing with the business, right?

And that's largely components that are kind of stuck, if you like, until we solve for some of the decommits and constraints that we're seeing on the decommits side. I mean I think if you think about inventory, it will grow with the business. There's no doubt. I don't I think the turns probably don't -- hopefully, we can manage to the kind of the current turns into next year even in a constrained environment, right? The purchase commitments, I mean this is something that we obviously consciously decided to do its multiyear in nature. We've taken some strategic positions on some key components within that. We will continue to manage that number and to manage that view. You should expect that number to start to come down as lead time start to come in, right, and we'll look to kind of resize that to whatever the constraint is going to be, right? So that will move around. It tended to be kind of a predictor of revenue a static predictor of revenue. It's something that we're going to continue to manage. And like I said, I would hope to start to see that come down. In terms of risk, we've tried to target products that have a reasonable life ahead of them so that stuff does move around, you'll still have the opportunity to sell it kind of into the future. That's been an important part of kind of thinking through that. It's not going to be risk free, but obviously, we try to make it a risk-adjusted approach.

So one of the areas that people have been a little nervous about lately is the service provider category. It's not a huge category for you, but have you seen any volatility in that business that might be notable that we should be aware of? There was at least one company that sharply lowered their expectations for the fourth quarter after having held an Analyst Day on September 14, came back and promptly lowered their guidance a big time because of a curtailment of telco demand, which it sounds like it was more a U.S. service provider. So what are you seeing on the service provider about the visibility to that business?

Yes. I mean, obviously, it's a much smaller part of our business, right? It has -- I mean, the demand there has been growing. It's kind of caught up on the whole supply constraint world as well, right? And that it is kind of limiting deployments to that business. There are -- again, we have some more extended visibility because of that, right? So I don't think we've seen anything different there. But again, we're not -- we're exposed to very particular use cases with kind of a constrained supply environment. So I don't know that we've seen anything different or that we would see anything different because of those factors.

And then I've got a question here from the audience. Let me read this to you. Are any customer segments susceptible to access inventory accumulation and digestion. I'm assuming a means of your product? And is there a cyclical element to demand? Or do the secular tailwinds offset this?

I mean I think on the inventory side, I don't think we've been able to get customers to a point where they could start to build inventory yet, right? It's still been very supply constrained. Anshul talked on the conference call about escalations when there's decommits et cetera. I think that's very much the case still, right? So we're still in a world where we're chasing supply, and we're trying to meet commitments to customers. And if you're unfortunate to have to de-commit because we've had a de-commitment. That's a very difficult situation. So that doesn't feel like an inventory type situation, right? In terms of cyclicality, I mean, we've talked previously, we talked again at the Analyst Day a little bit that we have to look at the cloud business and think that maybe there's some cyclicality to that spend, right? We saw some pullback back in end of '19 into '20. So when we think about like our 5-year CAGR, we're obviously building in some cyclicality there for cloud. How exactly that plays out, honestly, we'll have to see. But we think we have to at least run the business on the basis that, that can be the case, right? And then enterprise and some of the other pieces where we're share gainers, et cetera, can be more consistent growers and cloud is maybe a little bit more cyclical. On the other hand, I think we've proven through multiple cycles now that we get to go back to the cloud and get our fair share of that cyclical upside as well, right? But it may be that cloud is more cyclical and not just a straight line up and to the right.

Well, so the other side of that coin, though, could be that the AI adoption in the higher intensity of networking infrastructure builds around it to prove to be early innings of a major acceleration in demand for gear that offsets that cyclical decline that you might see if it was just conventional applications being deployed.

Yes. I mean, I think certainly, over a time period, it is absolutely positive for growth. But there will be technology cycles and other things kind of embedded in that, and we'll just have to see exactly how that plays out. I mean, again, you saw the Analyst Day, like, how consistently the business performs over time with that 20% plus kind of CAGR, but there may be some volatility in that.

No doubt about it. No doubt about it. Going back into the cloud side of it, from the majors to the specialty cloud companies, -- can you talk about what kind of growth you're getting there. That's some of that's newer penetration. And a lot of that -- some of that's moving towards edge compute. How important is edge compute as part of that demand cycle?

Yes. I mean, I'll let Liz chime in here as well. I think that demand from the specialty cloud piece of the business has also been very healthy, right? I mean they're driving to the same technology trends, et cetera, as the cloud tightens right? We talked a little bit about how the large cloud companies were first kind of to drive to worry about supply and therefore, kind of we're earlier in terms of giving us some extended visibility. But we would expect kind of as we head into next year that we'll see we will see more supply going to those specialty cloud customers as well because they have -- I mean, they have placed demand and they have given us that extended visibility as well. I don't know, Lisa, if you want to take the edge computing piece of that question?

Yes. I mean, I think that you look at kind of specialty cloud service providers, they're all looking at getting their services closer to their customers, and that would possibly comprise of building out these kind of micro data centers. In the end, it's still networking traffic that needs to be connected back. And so you think about connecting all of these things and data center measures, much like we do for some of the loud cloud -- larger cloud providers, even enterprises that run kind of DCI networks. So I think that it's all positive for networking. It's all about just getting services closer to customers.

And so with Kubernetes and other edge applications becoming more and more prevalent, does that change the resiliency and the real-time nature of the traffic in a way that increases the demand for your high-performance capabilities.

I mean I think that as you're expanding out these applications, it's still -- there's still requirements to have those connected back to kind of your data center. And they have to have those connected over high-speed links. They have to have nonblocking. There's going to be the same network requirements as you're building out in local data centers. To get more in specifics, I'd probably call on Anshul, kind of talk a little bit more about some of the more fine features in tuning some of those traffic patterns.

Going back to the enterprise -- or the company as a whole, what's going on with wage rates and attrition rates and staffing levels and things of that sort, is there any improvement in the hiring environment?

Yes. I mean I think last year, earlier this year was probably kind of at a peak from a pressure on salary increases retention, et cetera. I think we've definitely seen things start to cool off a little bit on that and I think it's going to start to return to something more normal, and that probably continues just given some of the changes in the environment. So I think if anything, we've seen that get slightly better and hopefully that continues.

So within your existing employee base, current present -- current people have not included, what kind of wage inflation are we looking at Arista that needs to be absorbed?

Yes. I mean I don't know that we've talked about specifics. But we did see kind of merit increases, et cetera, kind of earlier in the year that were higher than normal. I think everybody did, right? And there was a lot of pressure on hiring and on retention in that environment. But I think that is certainly starting to kind of return to something more normal now.

Okay. So just to remind us, which quarters do you do actually do the performance of risers, -- is that generally in the beginning of the year? Or is it -- have you proved for bonuses at the end of the year? Or how does that work?

Yes, it moves around a little bit. I mean, the bonuses tend to be annual fiscal year, pretty typical. And then the salary increases, et cetera, kind of moves around a little bit sometime usually middle of the year, plus or minus. Yes, see.

Okay. In terms of the pricing environment, there was a lot of discussion about prices going up considerably for networking gear. Less so in the cloud, I think, than in the enterprise, where are we on pricing increases among your competitors and at Arista per se?

Yes. I mean, so we talked about kind of we had 2 price increases that we did one back in November of last year that was pretty broad-based, 5% to 10%, showing customers kind of some of the escalation in in costs and component costs, et cetera, and getting agreement that they would help fund those, right? And then we did something smaller scale in April and May of this year, roughly 5% for a subset of parts, and we'll see that kind of kick in here sometime middle of 2023, right? So that's the extent of what we did. It was -- we've tried to be pretty transparent with customers where we had significant cost increases. We've exposed those to customers, and they've agreed to kind of price increases to cover those. And that's been our approach. It's been very much a negotiated kind of approach with customers with large enterprise customers and with the cloud. competition, it's hard for me to comment exactly on what they've done. I mean I think...

I think you would see some idea. But do you think the competitors have raised price more than you have, and that's actually the raised the umbrella? Or do you think it's comparable?

I think it depends on which parts of the business and where -- that the actions were probably not uniform across the entire businesses and there have been different actions and different pieces of the business.

Well, my presumption has been that your big competitor has taken price actions in enterprise and commercial and used it to subsidize trying to compete against you in cloud. Do you think that's an accurate read?

Yes, it's hard for me to get too much into what they've been doing to be honest at that, but...

You can't blame a guy for trying. All right. So are those price increases sticking?

I think for -- I mean it's going to be linked to the cost structure and the supply chain, honestly, right? I think they'll stick for as long as the cost escalations are in place. And then if we start to get improvements, which hopefully we will, we'll go drive the cost structure, and I would expect customers to come back and look for relief on some of those, right? Exactly the timing of that, everybody is going to kind of make sure that you've secured kind of cost improvements and stuff before you start to unravel those. But I think over time, there will be some pressure to do that.

So there's been a lot of discussion around 400 gig as a cycle. I've never argued that the people should be looking at speeds and feeds. That's so 2000 time frame. It's such a legacy viewpoint. But as gig has got a lot of play. I think you've answered it quite clearly that it's not 400, it's 100, 200, 400. And in the future, probably 600 to 800. But has that changed the competitive landscape at all in terms of the ability of the competitor have any impact on your business?

Look, I think what's been great to see is kind of the consistency with which the team has executed through these product cycles, right? And the ability to partner with these customers and ensure that you get your fair share of spend. I think we've seen that now multiple cycles, right? I think 400 really 400, 100, 200, 400 hasn't really been any different, right? We've brought good products to market on time, and they've been well received by customers.

And a better software.

Pardon?

And much better software.

And much better software. I mean it's the whole package, right? You're not selling pieces, you're selling a system, right? And you're selling system capabilities.

So in the environment where enterprises are going into hiring freezes that put them into real challenges to try to cope with all of the technology that they want to deploy and the challenges of keeping that running. Does that accelerate the adoption of your technology and provide a tailwind which might be counterintuitive?

Yes. Look, I think for these enterprises, if they're thinking about their businesses in a near-term basis, and they have plans to kind of execute on new technology that drives efficiencies, right? Because I think most enterprises have found themselves more reliant on technology and on the network post COVID than they were before, right? So as they make investments and they choose to make investments, our focus is absolutely on operational efficiency and how do you maintain uptime, quality, all the things that the cloud has historically cared about, right? And how do you manage those footprints in the most efficient way. And by the way, have time and resources to do time to service and to do other things as well, right? I think that's the focus for the enterprise customers for us. I think enterprises that are on that path and have decided to make those investments. I don't know if that changes unless we see a really big disruption from a macro perspective, et cetera. And then obviously, if you see that, then all bets are off. But if it's -- if you're continuing maybe in a somewhat constrained challenged environment, but this is a positive, net positive for their business. I think you can see them continue to make those investments.

Another question come in from the field. Are R&D investments focused on evolutionary change? Or is there something more disruptive?

Again, I go back to the TAM that we kind of talked about at the Analyst Day. There's major opportunities there. I don't know if you consider them to be revolutionary change or evolution. I think it's revolutionary from -- when you think about some of the stake how networks are deployed, right, if you take the – see how the pipeline and just what that can do for our customer, that's pretty revolutionary to be able to actually set up your network in advance, right, and test it in advance before you ever deploy it into your actual infrastructure. I mean that's pretty revolutionary from a customer perspective versus a world where the best you could hope for was maybe roll back if you had a problem, right? So I think we are doing things that make significant -- have significant impact on enterprise deployments and enterprise network management. It's still within the scope of networking, which I think is a major positive, right, that you can have that kind of TAM expansion [indiscernible] within your area of expertise, that's a much easier TAM to go address in some ways and if you were trying to do things that work maybe revolutionary outside of your core business, right? We don't need to do that yet. There's a lot for us to earn our fair share of within the networking realm.

And I think differentially advantaged in executing against them as well.

That's right, where you really have a right to win, right? You have some technology and some capabilities that give you a big head start in terms of solutioning some of those things.

Well, we're run out of time, unfortunately. I could have gone on for hours with you guys. I need to get more into it. I certainly appreciate you guys joining us at the conference. You've always been very generous with your time, and we appreciate that. And to the large audience that dialed in, thanks so much for tuning in and listening to the fireside, and thanks for the questions as well.

Thank you for having us.

With that -- call it a wrap.

All right. Thanks.