Arista Networks (ANET) Q4 2022 Earnings Call Transcript

Arista Networks (ANET 6.45%)
Q4 2022 Earnings Call
Feb 13, 2023, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to the fourth quarter of 2022 Arista Networks financial results earnings conference call. [Operator instructions] As a reminder, this conference is being recorded and will be available for replay from the Investor Relations section at the Arista website following this call. Miss Liz Stine, Arista director of investor relations, you may begin.

Liz Stine -- Director, Investor Relations

Thank you, operator. Good afternoon, everyone, and thank you for joining us. With me on today's call are Jayshree Ullal, Arista Networks' president and chief executive officer, and Ita Brennan, Arista's chief financial officer. This afternoon, Arista Networks issued a press release announcing the results for its fiscal fourth quarter ending December 31st, 2022.

If you would like a copy of this release, you can access it online at our website. During the course of this conference call, the Arista Networks management will make forward-looking statements, including those relating to our financial outlook for the first quarter of the 2023 fiscal year, longer-term financial outlook for 2023 and beyond, our total addressable market and strategy for addressing these market opportunities, supply chain constraints, component costs, manufacturing capacity, inventory purchases and inflationary pressures on our business, extended lead times, product innovation, and the benefits of acquisitions, which are subject to the risks and uncertainties that we discussed in detail in our documents filed with the SEC, specifically in our most recent Form 10-Q and Form 10-K and which could cause actual results to differ materially from those anticipated by these statements. These forward-looking statements apply as of today, and you should not rely on them as representing our views in the future. We undertake no obligation to update these statements after this call.

Also, please note that certain financial measures we use on this call are expressed on a non-GAAP basis and have been adjusted to exclude certain charges. We have provided reconciliations of these non-GAAP financial measures to GAAP financial measures in our earnings press release. With that, I will turn the call over to Jayshree.

Jayshree Ullal -- President and Chief Executive Officer

Thank you, Liz. And I'm glad we avoided Valentine's Day this time. Thank you, everyone, for joining us this afternoon on our fourth-quarter 2022 earnings call. 2022 has certainly been a record year for Arista.

You might recall, in November 2021 Analyst Day, we have given you a guidance of 30% growth and instead have achieved well beyond that at 48% growth for the year, driving to an annual revenue of 4.38 billion with a non-GAAP earnings per share of $4.50, translating to an EPS growth of 58% for 2022. Indeed, a memorable year. Let's get back to some Q4 2022 specifics. We delivered 1.276 billion for the quarter with a non-GAAP earnings per share of $1.41.

Services and software support renewals contributed approximately 15.8% of the revenue. Our non-GAAP gross margin was 61%, influenced by our supply chain overhead and cloud tightening concentration. International contributions registered at 23.5%, with the Americas at 76.5% in 2022. This was one of our strongest-performing international quarters in recent history.

In terms of Q4 2022 verticals, cloud titans was our largest and first, followed by enterprise, and then specialty cloud providers at third place, financials at fourth, and service providers at fifth place. In 2023, we will report the three segment sectors instead of the verticals. Shifting to the segment sector revenue for 2022. Cloud titans contributed significantly at approximately 46%, resulting in a triple-digit growth annually.

Enterprise and financials together were strong at approximately 32%, while the providers were at proximately 22%. Both Meta and Microsoft are now far greater than 10% customers at 25.5% and 16% contribution, respectively. Clearly, we continue to enjoy a strong and strategic partnership with M and M. And with that, I'd like to know invite Anshul Sadana, our chief operating officer, to shed more light on our cloud routing performance.

Anshul Sadana -- Chief Operating Officer and Senior Vice President

Thank you, Jayshree. Our partnership with Microsoft and Meta grew even stronger last year. Both of these titans are in the midst of deploying our next-gen 100, 200, and 400 products at several details of their networks. The cloud is reshaping the internet with their massive footprint, global backbone, and edge partnerships.

We are proud to have our products designed into pretty much all of these use cases. In addition, our business with the other titans continue to grow as well. We had additional design wins in backbone, WAN, and edge products. For the past year, we ramped our 7800R3 series, high-density, 400-gig, near-lossless spine.

We also introduced several new products based on Tomahawk 4 and our deep buffer, which will output your systems based on Jericho 2 to 7280 and the 7800R3 modular systems. While we will continue to add 100 and 400-gig products to our portfolio, we also launched our first one-rack unit 25-terabit product with 800-gig ports that can be broken out at two by 400 gig. These products are good use cases in high-speed applications such as artificial intelligence. EOs, our high-quality resilient Network Data Lake-based operating system, has also matured and now supports cloud scale, with multiple copies of the internet routing table.

We co-develop with our customers who greatly appreciate Arista engineering expertise. This past year, we furthered our partnership with Microsoft with SONiC support on many of our high-volume switches. Our work with them on automation and monitoring at scales is very well received for Azure and VM deployments. At Meta, we have our co-developed platforms such as the Tomahawk-3 7368 and 7388, which helps them improve throughput and data center power efficiency.

[Inaudible] and EOS are deployed with very high reliability and the cluster fabrics using these products. Our deployment of the backbone and integrated AI and recommendation engines with the 7800 series are now smoothly deployed in production. We don't control macro. We don't control our customers' capex plans.

But when they do spend, we are there with them to make these next-generation cloud networks successful. AI is a good example. We are continuing to grow into next-generation architectures with our cloud customers. The use cases we are involved in are generally core to their business and not an optional spend.

Our cloud journey have come a long way over the last last decade. This is still a very exciting market segment given the pace of innovation and our partnerships here. Back to you, Jayshree.

Jayshree Ullal -- President and Chief Executive Officer

Thank you, Anshul. Wow, 2022 was indeed a phenomenal year with the cloud titans. And these partnerships have been nurtured for well over a decade with expanded use cases such as these AI workloads. We remain confident about meaningful share with both Microsoft and Meta, and we expect both of them to once again contribute greater than 10% of our total revenue in 2023.

In the non-cloud category, we have registered a solid number of million-dollar customers as a direct result of our momentum in the enterprise and campus throughout the year. We have now surpassed 9,000 cumulative customers. In terms of 2022 product lines, we have three categories: one, our core cloud and data center products built upon a highly differentiated Arista EOS stack that is successfully deployed across 10, 25, 100, 200, 400-gig speeds. This drove approximately 68% of our revenue with strong cloud and enterprise spending cycles.

We believe that we will continue to gain market share in the high-performance switching and have already grown from the teens to the 20s. In the 100 and 400-gig category, we have now earned the No. 1 position according to industry analysts. We have also doubled our 400-gig customers from 300 in 2021 to over 600 in 2022.

Our second market is network adjacencies comprised of routing, replacing routers, and our cognitive campus. We doubled our campus orders to exceed 400 million in 2022. But we did fall short of our revenue due to extreme supply chain shortages. We maintain our campus momentum and are aiming for 750 million in revenue by 2025.

Our investment in cognitive campus spine, spline, wired and wireless, have generated significant customer interest and demand based on CloudVision and CloudVision CUE. Considering this is only our third full year of shipping versus incumbents who have been in the market for 15 to 30 years, we are very proud of our execution. Our vision for a cognitive campus with network as a service and edge as a service based on NetDL is resonating extremely well and being embraced by our campus customers. We have also successfully deployed in many routing edge and peering use cases, such as securing data in transit with TunnelSec encryption, precision and performance for mobile networks, cloud exchanges, and metro Ethernet.

Enterprise customers can now deploy EOS with a single EVPN protocol, whether it's for data center, data center interconnect, or WAN, delivering multiple profiles. Just in 2022 alone, we introduced six EOS software releases, 600 new features across 50 new platforms. Stay tuned for more in 2023 as we will be introducing new WAN transit functionality. The campus and routing adjacencies together contribute approximately 14% of revenue.

Our third category is network software and services based on subscription models such as Arista A-Care, CloudVision, DMF observability, advanced NDR, with AVA sensors for security. Arista subscription-based network services and software contributed approximately 18% of our total product line. We are proud to note that CloudVision exceeded 2,000 cumulative customers, up from 1,500 the prior year, and is really a compelling data-driven platform delivering network agility, continuous integration, and operational excellence. Arista's non-cloud wins continue as well.

While Arista's 2022 headline has been the massive contribution from our cloud customers, we are pleased with the momentum of our enterprise and provider customers as well. Arista continues to diversify its business globally with multiple use cases, helping our prospects and customers realize these operational benefits with modern software. And automation has been a recurring theme. And so, let me share a few examples that we have earned a seat at the table at.

Our first example highlights the universal cloud network win in the travel industry. Like many conversations, the customer's initial ask was to gain more visibility into their infrastructure. We presented our DMF, DANZ Monitoring Fabric solution, but it quickly transitioned to a general data center for all of Arista's platform offerings. The customer chose our layer 3 leaf-spine EVPN design for their critical VDI environment.

The customer also leverages CloudVision for their day Day 0, Day 1, and Day 2 operations using our chassis spine and R3 leaf and out-of-band management to reduce their operational risk. Our second win highlights the financial customer's choice to proceed with Arista's best-in-class Cognitive campus with wired and wireless solutions. As with every campus opportunity, it was competitive. CloudVision once again was a key differentiator for us as we quickly became their trusted advisor.

Our virtual training environment, such as Arista's Cloud Test, gave architects the relevant hands-on experience. Our low CBE count and commitment to single EOS with high quality was unmatched by our peers. Arista continues to make inroads on regional tier 2 and tier 3 service providers. Regional service providers are in the middle of expanding and looking for a reliable compressed routing footprint.

The third win highlights the evolution of our EOS routing stack. Our customers are now deploying VPN services on top of their MPLS segment core networks. Arista's high-density 100-gig MPLS routing, together with long range optics and a fully automated deployment using CloudVision and zero-touch provisioning, delivered that cloud-like operating model. Our next win is an international one in the education sector for high-performance computing.

HPC demands low latency, deep buffers, and real-time visibility. This customer chose Arista for providing a highly elastic VXLAN-based leaf-spine pod with best-in-class performance. Consistent technology between our spine and edge leaf, anchored by our flagship 7800 chassis and combined with CloudVision-based real-time telemetry, compliance and automation, really created a lasting impression. Our final win for this quarter's announcement is an exciting international one in the government sector.

Arista's 400-gig Ethernet was selected instead of InfiniBand for big data Hadoop cluster deployments. In this case, the customer chose us for our 400-gig solution with built-in encryption capabilities. The customer saw clear differentiation in our automated operations, hitless upgrade, and full real-time telemetry, ensuring comprehensive visibility of workloads in the fabric. As we enter 2023, Arista is well positioned as a game changer in data-driven client-to-cloud networking.

A key part of this transformation is to make our cloud-first principles and bring that to every aspect of the data network. Software functions such as routing for WAN, zero-trust security, and observability are moving into the Arista EOS set. We are building upon our cloud network heritage to bring proactive platforms, predictive operations, and a complete prescriptive experience, unifying data sets from multiple sources. Our NetDL architecture and AVA, our Autonomous Virtual Assistant using AI and ML and natural language processing techniques, is a very compelling combination.

Together, this architecture can gather, store, and process multiple modalities of network data. And this way, network operators can reconcile all their different silos. 2023 is the start of Arista's 2.0 journey. Arista 2.0 is our migration from best-of-breed products to best-of-breed platforms as we address our expanded TAM of 50 billion ahead.

We are uniquely qualified to bring modern software principles to build that world-class data center and data-driven networking. It is based on that foundational focus on quality, availability, AI-driven deployments with top-notch support. And as we undertake this 2.0 journey, we are excited to work with a collaborative ecosystem of our partners and customers worldwide to realize this vision. In summary, I'm so proud of our team's execution across multiple dimensions despite one of the worst supply chain backdrops ever witnessed.

A special thank you to our customers for their patience and support to us last year and to all the Aristans for their hard work and herculean efforts. Our tireless mission taught us valuable lessons, and we expect to emerge stronger. We reiterate our 25% annual growth outlook that we mentioned in the November 2022 Analyst Day as we now aim for 5.47 billion in 2023 in terms of revenue. Now, I will turn it over to Ita for financial specifics.

Ita Brennan -- Chief Financial Officer

Thanks, Jayshree, and good afternoon. This analysis of our Q4 and full-year 2022 results and our guidance for Q1 2023 is based on non-GAAP and excludes all non-cash stock-based compensation impacts, certain acquisition-related charges, and other nonrecurring items. A full reconciliation of our selected GAAP to non-GAAP results is provided in our earnings release. Total revenues in Q4 was 1.276 billion, up 54.7% year over year and well above the upper end of our guidance of 1.175 to 1.2 billion.

While we experienced some improvement in overall component supply in the quarter, shipments remained somewhat constrained with lingering shortages on a handful of parts. Services and subscription software contributed approximately 15.8% of revenue in the fourth quarter, down from 16.3% in Q3. This is largely reflected growth in product revenue. Cloud services and software continue to grow on a more consistent basis.

International revenue for the quarter came in at 300 million, or 23.7% of total revenue, up from 17% in the third quarter. This quarter-over-quarter increase largely reflected improved contributions from our EMEA and region customers in the quarter. Overall, however, 2022 was a year of outsized growth for the U.S., up 61% year over year, largely due to domestic strength from our cloud titan customers. Overall gross margin in Q4 was 61%, at the midpoint of our guidance range of approximately 60 to 62%.

We continue to recognize incremental supply chain costs in the period combined with the healthy cloud mix. Operating expenses for the quarter were 235.3 million, or 18.4% of revenue, up from last quarter's 227.7 million. R&D spending came in at 153.2 million, or 12% of revenue, up from 150.1 million last quarter. This primarily reflected increased headcount and new product introduction cost for the period.

Sales and marketing expenses were 67.4 million, or 5.3% of revenue, compared to 62.8 million last quarter, with increased headcount and higher variable compensation expenses. Our G&A costs came in at 14.6 million, or 1.1% of revenue, consistent with last quarter. Our operating income for the quarter was 543.2 million, or 42.6% of revenue. Other income and expense for the quarter was a favorable 13.6 million, and our effective tax rate was 20%.

This resulted in net income for the quarter of 445.1 million, or 34.9% of revenue. Our diluted share number was 315.2 million shares, resulting in a diluted earnings per share number for the quarter of $1.41, up 72% from the prior year. Now turning to the balance sheet. Cash, cash equivalents, and investments ended the quarter at approximately 3.024 billion.

In the quarter, we repurchased $2.8 million of our common stock. As a reminder, for the year, we repurchased $670 million, or 6.5 million shares, at an average price of $104 per share. This leaves us with $257 million available for repurchase under our existing billion-dollar board authorization. The actual timing and amount of future repurchases will be dependent on market and business conditions, stock price, and other factors.

Now turning to operating cash flow performance for the fourth quarter. We generated approximately 40 million of cash from operations in the period, reflecting strong earnings performance, mostly offset by a significant increase in working capital. We experienced growth in inventory with the receipt of components for future shipments, including shipment delayed due to supplier decommits. We also experienced growth in accounts receivable and DSOs in the quarter, with a significant ramp in service renewals and product shipments toward the end of the quarter.

DSOs came in at 67 days, up from 51 days in Q3, reflecting the linearity of billing and growth in service renewal for the period. Inventory turns were 1.6 times, down from 1.7 last quarter. Inventory increased to 1.3 million in the quarter, up from 1.1 billion in the prior period, reflecting higher key component of peripherals inventory and an increase in switch-related finished goods. Our purchase commitments at the end of the quarter are $3.7 billion, down from 4.3 billion at the end of Q3.

We expect this number to continue to decline in future quarters as component lead times improve and we work to optimize our supply positions. As a reminder, we are focused our extended purchase commitment strategy on early life cycle products to help mitigate the risk of excess or obsolescence. Our total deferred revenue balance was 1.041 billion, up from 941 million in Q3. The majority of the deferred revenue balance are services related and directly linked to the timing and term of service contracts, which can vary on a quarter-by-quarter basis.

Approximately 125 million balance, down from 165 million last quarter, represents product deferred revenue largely related to acceptance deposits for new products, most recently with our large cloud titan customers. For clarification, this represents a reduction in product-related deferred revenue for the year of approximately 40 million. Accounts payable days is 43 days, down from 56 days in Q3, reflecting the timing of inventory receipts and payments. Capital expenditures for the quarter were 10.5 million.

Now turning to our outlook for the first quarter and beyond. 2022 was a year of outstanding revenue and earnings growth, driven by an acceleration of demand from our cloud titan customers, coupled with healthy contributions across the other areas of business. Supply remained constrained throughout the year and somewhat limited our ability to ramp product shipments in response to this demand. As we head into 2023, we look forward to resolving the final kinks on the supply side and reducing lead times for our customers.

As outlined at Analyst Day, we expect to achieve year-over-year revenue growth for 2023 of approximately 25%. This reflects continued healthy demand across all of our market sectors, but recognizing that as lead times improve, we should expect to see some reduction in visibility. In terms of quarterly trends, you should expect accelerated year-over-year growth in Q1, moderating as the year progresses versus more difficult year-over-year comps. On the gross margin front, we expect to continue consuming broker parts and other inflated cost items in the first quarter.

And this, combined with a continuing healthy cloud contribution, will pressure gross margins. Beyond that, we should see some steady improvement as we move through the year with fewer broker parts and the opportunity to optimize the manufacturing ramp. Now, turning to spending and investments. We remain cognizant of the overall macro environment and will be prudent in making investments as we move through the year.

You should, however, expect us to make targeted hires in R&D and go to market as the teams seize the opportunity to secure talent. On the cash front, FY 2022 was a year where much of the 1.4 billion net income generated by the business was consumed by incremental working capital needs and additional cash tax payments under Section 174, which defers the deductibility of R&D spending. As we head into 2023, we should expect a focus on supply chain and working capital optimization while recognizing the need for balance in areas of higher supply risk or where lead times remain extended. Interest income should continue to increase as we move through the year, with 20 million in Q1, going toward the quarterly contribution of 40 million exiting the year.

With all of this as a backdrop, our guidance for the first quarter, which is based on non-GAAP results, excluding noncash stock-based compensation impacts and other nonrecurring items is as follows: revenues of approximately 1.275 to 1.325 billion, gross margin of approximately 60%, operating margin of approximately 40%. Our effective tax rate is expected to be 21.5%. Our diluted shares, on a post-split basis, at approximately 316 million shares. I will now turn the call back to Liz.

Liz?

Liz Stine -- Director, Investor Relations

Thank you, Ita. We will now move to the Q&A portion of the Arista earnings call. To allow for greater participation, I'd like to request that everyone please limit themselves to a single question. Thank you for your understanding.

Operator, take it away.

Questions & Answers:

Operator

We will now begin the Q&A portion of the Arista earnings call. [Operator instructions] Our first question comes from the line of Jason Ader with William Blair. Please go ahead. Your line is open.

Jason Ader -- William Blair and Company -- Analyst

Yeah. Thank you. Good afternoon, everyone. I just wanted to ask, I guess, either for you on the order trend, we all know that the revenue is incredibly strong right now because of all the lead time supply chain issues, but maybe some visibility on how orders are trending versus revenue.

Ita Brennan -- Chief Financial Officer

Yeah, Jason, you know, we don't really talk about orders and backlog. I think we just talk about kind of healthy demand across the various pieces of the business and obviously say, you know, we're reaffirming the guidance for 2023. So there is good support for that. Jayshree, I don't know if you have to add anything to that.

Jayshree Ullal -- President and Chief Executive Officer

I think you said it well. The order trends in 2022 were good. We wait, watch, and see if the macro has broader effects in '23. But our guide and our tone effects that we are pretty positive at the moment.

Jason Ader -- William Blair and Company -- Analyst

So no impact from macro of significance thus far on orders?

Jayshree Ullal -- President and Chief Executive Officer

When we have something to say, we will, Jason. So far --

Jason Ader -- William Blair and Company -- Analyst

OK. Fair enough. Thank you.

Liz Stine -- Director, Investor Relations

Thank you.

Jayshree Ullal -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Amit Daryanani with Evercore. Please go ahead. Your line is open.

Amit Daryanani -- Evercore ISI -- Analyst

Yep. Thanks for taking my question and congrats on the quarter. When I think about this 25% growth in calendar '23, how do you think it stacks up across the three verticals for you folks? That would be really helpful. And then kind of where do you see the strongest versus weaker growth? And then on the cloud titan side, as you think about growth in '23 and maybe even beyond, do you think that's really a function of what the capex plans look like on the networking side? Or do you think there's a bigger narrative around the share gain potential against white-box solutions, especially as workflows get more complicated that could help you as well? Thank you.

Jayshree Ullal -- President and Chief Executive Officer

OK. I'll take the first one and I'm sure Anshul will have a few words on the second. How does this break down, if you look at 20 -- let me go back to 2021. We had a very nice even split and cloud titan was actually kind of on the low side.

It was 30%, if I remember right, 30, 30, 40. And if you look at 2022, cloud titan was outsized, the 30 went to 46. If I had to guess, I would say we lead between those two numbers. I still think we'll have a very healthy cloud titan mix.

But the enterprise momentum continues to be strong and you'll see a contribution from that, as well as the tier 2 specialty cloud providers and service providers as well. So I think it'll -- my guess is it'll look somewhere between 21 and 22 in terms of split. We'll see as the quarters progressed. In terms of the capex and the impact of cloud titan, look, we don't exactly and equivalently track the capex.

But eventually, you know, CapEx is an indicator of future -- of our future cloud titan progress. I don't believe at this point that our progress is coming from white box or specific things like commodity, things like that. It's really coming from, as Anshul you pointed out, a very strategic seat at the table on new use cases like the AI workloads, which has a multiplicative factor on our bandwidth. So I believe we'll have a real seat at the table, especially with Microsoft and Meta.

And we'll continue to see what the use cases are that emerge that we can imagine beyond '23. But we've been working on this for 10 years and I think it'll continue to be strong. Thank you.

Liz Stine -- Director, Investor Relations

Thank you, Amit. We can take our next question, operator.

Operator

Your next question comes from the line of Paul Silverstein with Cowen. Please go ahead. Your line is open.

Paul Silverstein -- Cowen and Company -- Analyst

Thanks. I hope you'll indulge the clarification. I just want to make sure. You said Microsoft was 16 and metal was 25, or o I have that backwards?

Jayshree Ullal -- President and Chief Executive Officer

Yes. 25.5 on Meta, and Microsoft 16.

Paul Silverstein -- Cowen and Company -- Analyst

OK. Now for the question, what portion of your qualifying revenue in general and how much of the growth in Microsoft and Meta was -- if you know it, what's your sense for how much of that was AI driven? Any visibility as to the growth in the AI and its impact on demand for your switches and various use cases over the course of the next few years with your cloud titan customers in general, including Microsoft and Meta?

Jayshree Ullal -- President and Chief Executive Officer

Yeah, we see AI as a very, very important use case and workload for all our cloud titan customers. Clearly, it's just the first innings. We're just beginning. So very much like cloud networking 10 years ago, we see AI as an additional use case.

It is a very, very small portion of our use cases so far. So a lot of upside ahead.

Paul Silverstein -- Cowen and Company -- Analyst

Is it possible to quantify, Jayshree?

Jayshree Ullal -- President and Chief Executive Officer

Too early to quantify. It's not material.

Paul Silverstein -- Cowen and Company -- Analyst

That's fair. OK. I appreciate it.

Jayshree Ullal -- President and Chief Executive Officer

Thanks, Paul.

Operator

Your next question will come from the line of Aaron Rakers with Wells Fargo. Please go ahead. Your line is open.

Aaron Rakers -- Wells Fargo Securities -- Analyst

Yeah. Thanks for taking the question and congrats on the quarter as well. I guess maybe this is for Anshul, building on the last two questions, is that, you know, as you look at kind of adding up the Meta and Microsoft contribution and you compare that to 46% of total cloud titans, your other cloud titan contribution is still pretty small. So, Anshul, when you're engaging with other cloud opportunities, maybe you can unpack that a little bit.

What's opening up the opportunities for you? Is it AI or is it something else that you're starting to see? And how do we start to think about that as an incremental growth driver?

Anshul Sadana -- Chief Operating Officer and Senior Vice President

Sure. Aaron, first of all, we are proud of our achievement for the first two, M and M, with their contributions there. On the other titans, we have been engaged fairly well with them. That business is also growing but it pales in comparison to Microsoft and Meta.

But that is not insignificant compared to other opportunities in the market, and we continue to use those. Those partnerships are very, very strong as well. At some point in the future, if the opportunities materialize, many of these customers decide to go back in the market and buy switches from industry like us, I think we'll perform very well. We start to reach out and get to that opportunity.

It's not there yet, but it's happening in a year or two or three, I don't know. When it happens, we'll be there. And we will do well in where we are today with them, which is essentially routing use cases or PCI use cases or WAN or edge. And we touched on this topic before, too, but if there was shift buying more from the outside, I think we are ready.

Aaron Rakers -- Wells Fargo Securities -- Analyst

Yep. Thank you.

Operator

Your next question comes from the line of Jim Suva with Citigroup. Please go ahead. Your line is open.

Jim Suva -- Citi -- Analyst

Thank you. Jayshree and Ita and everyone, congratulations on great results. My question is, I think it was Ita made the comment to expect a deceleration in revenues as we progress throughout the same -- throughout the year just to get to the 25% revenue growth. I want to make sure I heard that right, because that would then also mean that even with very, very stiff, difficult year-over-year comps or revenues, you wouldn't expect them to go negative at all.

And I guess when we look at that deceleration, it kind of seems like a steep decline to get to an average of 25%. So can you help me with my math there or the missing pieces, or is it some conservativism? Or I'm just kind of wondering, but it definitely doesn't seem like negative growth is in the works.

Ita Brennan -- Chief Financial Officer

No, no, we didn't talk about negative growth. If you look at the trend last year, you'll see it really accelerated post-Q1. So that's why you're seeing a much stronger growth rate year over year with our Q1 guide. And you will as you move through the year.

So I think after Q1, it's better to start to look at it as a quarter by quarter, on a quarter-by-quarter basis and kind of grow your revenues quarter by quarter. But certainly no kind of negative growth in that. And I think you'll get a better answer if you kind of just kind of quarter over quarter from there on out. Q1, it was a much lower revenue number last year going back on the trend.

Jim Suva -- Citi -- Analyst

Great. Thank you for the details and congratulations and happy Valentine's to all of you.

Ita Brennan -- Chief Financial Officer

Thank you.

Jayshree Ullal -- President and Chief Executive Officer

Thank you, Jim. It's all about comps, isn't it?

Operator

Your next question comes from the line of Samik Chatterjee with J.P. Morgan. Please go ahead. Your line is open.

Samik Chatterjee -- JPMorgan Chase and Company -- Analyst

Oh, hi. Thanks for taking my question and congrats on the results as well. I guess a quick one, which is --

Jayshree Ullal -- President and Chief Executive Officer

Samik, can you speak louder?

Samik Chatterjee -- JPMorgan Chase and Company -- Analyst

Yep. Hopefully, you can hear me now. Is this better? Can you hear me now?

Jayshree Ullal -- President and Chief Executive Officer

Yeah, much better. Thank you.

Samik Chatterjee -- JPMorgan Chase and Company -- Analyst

Yep. So I was just going to ask you on your large cloud customer, Meta, and the recent announcement around architecture changes relative to data centers and trying to run AI workloads and non-Ai workloads together on the same data center and some of those related announcements. Have you been able to dissect that and sort of have any thoughts about how that might impact their spending in relation to switching and routing equipment, particularly as it relates to your portfolio? Thank you.

Jayshree Ullal -- President and Chief Executive Officer

Yeah. Samik, I'll say some few words, and obviously, Anshul can get into detail. We don't foresee any major architectural changes in the buildout of their AI clusters. Clearly, we continue to work with them on the front end of the network and on the back end.

These have been based on the flagship 7800 spines, AI spine, where you can have a distributed AID for it can be going straight into the spine. And when you have, you know, the hundreds and thousands of GPUs, you need a lossless fabric that has all of the congestion control and bandwidth management required. So in the short term, no major change in architecture. In the long term, as these customers look for efficiency, we look for these Ai fabrics to get larger or more distributed.

But there naturally be an evolution as the market grows. But no dramatic shift or change, just more of the same. Anshul, [Inaudible]?

Anshul Sadana -- Chief Operating Officer and Senior Vice President

Samik, just keep in mind, Meta slowed down spending a few years ago, right? So, there's some catching up to do for the spend that got missed out. So you have to sort of go back and average it out to understand the trend. And second, just to mention, from what we know so far, we don't believe there's any change in the networking spend. The capex optimizations they are discussing are either tied to how the buildings are built, facilities, or letting go of nice-to-have projects.

Samik Chatterjee -- JPMorgan Chase and Company -- Analyst

OK. Thank you. Thanks for taking my question.

Liz Stine -- Director, Investor Relations

Thank you, Samik.

Operator

Your next question comes from the line of Tal Liani with Bank of America. Please go ahead. Your line is open.

Tal Liani -- Bank of America Merrill Lynch -- Analyst

Hi. I want to ask about the other part that no one is asking about the non-cloud titans. So if I back cloud titans, non-cloud grew 14.6%. And the question is, first of all, on last year, did you allocate components to cloud titans? And was this area more pressured than cloud titans when it comes to allocation? So if that's the case -- or what is the answer about what happens this year, this coming year, or this year on the non-cloud titan portion? What drives it to accelerate from the 14.5% growth of last year? Thanks.

Jayshree Ullal -- President and Chief Executive Officer

Got it, Tal. So first of all, absolutely not, we don't do any allocation. It's very much a first in, first out algorithm. And many of the cloud titans clearly were the first in, and so therefore they're the first out.

Our enterprise customers and the momentum and the demand is very high. And we fully expect that they will get their turn this year in 2023. But given how constrained we were in supply, this is the way it worked out in terms of revenue.

Tal Liani -- Bank of America Merrill Lynch -- Analyst

Is there -- what are the underlying driver for growth acceleration to drive-- outside of components, better components supplies, what are the underlying growth drivers for 2023 versus 2022?

Jayshree Ullal -- President and Chief Executive Officer

I think they're very similar. And you heard me talk about some of the enterprise momentum. Customers are really looking for consolidation of their data centers in terms of a better automation, better telemetry, better, you know consolidation of the operational advantages in the data center. Campus is a huge use case.

Routing and bringing all of the routing features that we've been working on for over five years to bear has been a third one. Observability of security is another use case, telemetry with CloudVision. So very similar themes to 2022 that we're seeing in '23.

Tal Liani -- Bank of America Merrill Lynch -- Analyst

Great. Thank you.

Liz Stine -- Director, Investor Relations

Thanks, Tal.

Operator

Your next question comes from the line of Fahad Najam with Loop Capital. Please go ahead. Your line is open.

Fahad Najam -- Loop Capital Markets -- Analyst

Thank you for taking my question. I had a couple of clarifications. The cognitive adjacency, I think 14% of revenue. Is it fair to assume it's fairly split evenly between campus switching and routing?

Jayshree Ullal -- President and Chief Executive Officer

Sorry, Fahad, can you repeat the question? I cannot hear you.

Fahad Najam -- Loop Capital Markets -- Analyst

The cognitive adjacency revenue that you gave, I think, was 14% of revenue, if I'm not mistaken.

Jayshree Ullal -- President and Chief Executive Officer

Yeah.

Fahad Najam -- Loop Capital Markets -- Analyst

And I'm just wondering, is the split even between campus and routing?

Jayshree Ullal -- President and Chief Executive Officer

Approximately, but both of them were large contributors, so I don't have the exact percentages. But yes, we think campus over time will become larger. But at the moment, I would say it's 6 or 1.5 a dozen of the other.

Fahad Najam -- Loop Capital Markets -- Analyst

Got it. Well, my question, how should we be thinking about, you know -- with AI and machine learning becoming more pervasive in cloud titan architectures and this prospective displacement of InfiniBand with Ethernet, how should we be thinking about the TAM opportunity? Because -- how big is this InfiniBand displacement opportunity, so to speak?

Jayshree Ullal -- President and Chief Executive Officer

Yeah. No, I think the InfiniBand TAM to date has a very [Inaudible]. We see, you know, $1 billion to $1.5 billion TAM. And it didn't address the AI workloads.

I think the advent of this new application is going to open up the whole AI networking and fabric TAM to much greater than InfiniBand. So not only do we have an opportunity to replace InfiniBand, but we have a greenfield opportunity for new Ai fabrics and clusters. So it's both, not just the legacy InfiniBand opportunity.

Fahad Najam -- Loop Capital Markets -- Analyst

So roughly how big do you think the opportunity is?

Jayshree Ullal -- President and Chief Executive Officer

I don't think -- there have been some market studies on this. Some people say 2 billion a year. Some people say 4 billion, some say it's going to 8 billion. So I think it's still too early to call.

It depends on how quickly the adoption of the AI fabric happens in all of our large customers.

Fahad Najam -- Loop Capital Markets -- Analyst

Thank you. Appreciate the answers.

Liz Stine -- Director, Investor Relations

Thanks, Fahad.

Operator

Our next question comes from the line of Pierre Ferragu with New Street Research. Please go ahead. Your line is open.

Pierre Ferragu -- New Street Research -- Analyst

Thank you. Good evening. I wanted to catch up on, you know, what you say, Jayshree, about routing, edge routing, and peering. And this opportunity just comes back as an interesting and intriguing area.

And so my question would be, anything you can give us in terms of sizing or how significant it is today? And then beyond that, could you give us a sense of how you understand like the long-term market dynamics in there? So it's a market where all, like, the legacy routing players are very strong, have, like, a very strong existing ecosystem. And I'm still not exactly clear on what market dynamics create the opportunities for Arista and how we should think about it in the long run. Is there an opportunity to replace incumbents in peering in large peering market? And if that's the case, how does that square with operators buying from you? Is that coming from other types of players like cloud players? So how does the opportunity shape up over time?

Jayshree Ullal -- President and Chief Executive Officer

Yeah. No -- Anshul, I would love your perspective on it. Let me kick it off. We think the router market is much bigger than the routing market.

The router market is the more legacy market that's been served by a number of traditional industry experts for 20 years and mostly servicing the service provider market. And that's a very traditional market that Arista has been participating some in. But we don't expect to be a major player in traditional service providers. However, you know, we've added so much routing features.

Routing is not --now part of our switching system. It's sometimes hard to separate as it's the same hardware, different software. If you just look at the last year, we've added Ethernet OEM capability, VPLS, timing with sync key, EVPN, MPLS gateway, multicast VPN, edge services, routing scale you heard Anshul talked about that can go over 4 million routes. So our portfolio is really transitioning to supporting 400-gig deployments.

And routing in the cloud scale is something they're very successful in. So on one hand, we're not super successful in the traditional service providers. On the other hand, we're hugely successful on the cloud. And then in between, we are finding ourselves moderately successful in a lot of the enterprise and specialty cloud providers.

Anshul, you want to add a few words?

Anshul Sadana -- Chief Operating Officer and Senior Vice President

Sure. Pierre, another angle here. If you look at how we started to enter this market, so, some of the CDN companies like Netflix and Spotify, these companies have an SDN approach to edge. It's a scalable architecture.

You can take a simple router from Arista and scale it out, and the automation and the SDK we provide allows the customers to do that, which is why we do very well in these use cases, both in the legacy full-feature traditional router. And our cloud customers, the titan, the tier 2 cloud, the providers, all these like architectures.

Liz Stine -- Director, Investor Relations

Thanks, Pierre.

Pierre Ferragu -- New Street Research -- Analyst

Thanks for your answers.

Jayshree Ullal -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Michael Genovese with Rosenblatt Securities. Please go ahead. Your line is open.

Mike Genovese -- Rosenblatt Securities -- Analyst

Great. Thanks so much. I guess just sort of theoretically in an AI data center. I mean, it's just, you know, current way of doing chat versus an AI chat, can you give us some sense of the switching intensity increase in the -- you know, in the new use case with AI? Is there a multiplier to put on the switching or the networking, you think about the, you know, higher amount of content and spend for AI?

Anshul Sadana -- Chief Operating Officer and Senior Vice President

Sure. Michael, I think that's -- it's very hard to generalize if you need a single number, but AI equates to so much more. But I'll give you an example of something that Andy talked about in the last Analyst Day. If you look at the recent cluster on which Meta published some papers about some of the time the GPUs were sitting idle because they were waiting for the support [Inaudible] to come back.

The network becomes the bottleneck and in this case, they had more bandwidth than you essentially become nonblocking. You can do your job, can run faster, and you can use your GPUs in a much more efficient manner. So the rough order of magnitude, your GPUs need about three times more bandwidth than a traditional computer network today. But again, that's a generalization, depends on every use case.

But if you need a single number, that's the one I would use.

Mike Genovese -- Rosenblatt Securities -- Analyst

Thank you.

Operator

Your next question comes from the line of Meta Marshall with Morgan Stanley. Please go ahead. Your line is open.

Meta Marshall -- Morgan Stanley -- Analyst

Great. Thanks. I just wanted to get a sense of on supply chain, you know, what you are seeing there in terms of did it loosen faster than you were expecting in Q4 and that was part of the upside, or just how you're looking at conditions kind of improving throughout the year and maybe just that kind of release to gross margins as we think about throughout the year and kind of the overhead of the inventory currently. Thanks.

Jayshree Ullal -- President and Chief Executive Officer

Thanks, Meta. I'll comment on it, and Anshul, I don't know if he wants too. Look, supply chain hasn't eased up enough for us. Maybe we have more demand than others, and that's why we're feeling it more.

But having said that, our Q4 numbers would have been even better if supply chain had eased. And our Q1 gross margin is a reflection that supply chain is still an overhead on our costs, right? We expect Q1 to be the absolute worst. We're going to improve thereafter. Every other quarters, the supply chain is going to be easing in the back half of '23.

And as you know, at the Analyst Day, we gave a guide of -- Ita, we said 61 to 63 for the year?

Ita Brennan -- Chief Financial Officer

Yep. Yep.

Jayshree Ullal -- President and Chief Executive Officer

So we fully intend to improve our gross margins every quarter thereafter after potentially hitting a low in Q1, which is an indication of supply chain improving. But at the same time, remember, another huge factor in our contribution to gross margins is the healthy cloud titan mix. We'd like to keep it healthy and ease supply chain and that'll give us some improvements.

Meta Marshall -- Morgan Stanley -- Analyst

Great. Thanks.

Jayshree Ullal -- President and Chief Executive Officer

Thanks, Meta.

Operator

Your next question comes from the line of Alex Henderson with Needham. Please go ahead. Your line is open.

Alex Henderson -- Needham and Company -- Analyst

Great. Thanks and congrats on a super quarter. I wanted to push a little bit more on the supply chain issue. Just talking about -- I get the point that gross margins are the worst in the first quarter, but when do you think the balance between availability and your backlog starts to come into balance so that you can actually ship what orders come in and the duration on your backlog, which I know you don't talk about, but conceptually starts to come in line so that we're back to a fairly normal book and ship environment?

Jayshree Ullal -- President and Chief Executive Officer

Paul, I'll let Ita answer this, but I wouldn't call our current environment approaching normality for some time. So we hope it'll be second half that the supply and the demand catch up. But I hope it catches up because we improve our supply, not that -- it's not that demand goes down. So we want it to also improve for the right reasons.

Ita Brennan -- Chief Financial Officer

Yeah, I think, you know, the goal, obviously, is to improve -- supply improve and then improve manufacturing and improve efficiencies. And we'll be working on that as we go through the year. I don't know what the final normal will be. We'll have to see.

I think just given everything that we've been through from a supply chain perspective, it's probably, you know, maybe there's a there's a little bit more lead time visibility that'll end up in the system at the end, but we'll have to see, right? 

Jayshree Ullal -- President and Chief Executive Officer

Right. I think what we can safely say is we are getting comfortable that lead times will improve throughout the year. Will we get to normal lead times? I think that'll still take time because we've got to work through our demand.

Alex Henderson -- Needham and Company -- Analyst

If I could, just one clarification. Did you say you had a decommitted in the fourth quarter? I thought I heard that in the presentation. Thank you.

Jayshree Ullal -- President and Chief Executive Officer

No.

Ita Brennan -- Chief Financial Officer

Decommits on the supply side.

Jayshree Ullal -- President and Chief Executive Officer

Yeah.

Ita Brennan -- Chief Financial Officer

I mean, we've had [Inaudible] starts on the supply side for sure. I think if that's the question.

Jayshree Ullal -- President and Chief Executive Officer

Nothing -- it had to do with our supply constraints. Component vendors are constantly decommitting.

Alex Henderson -- Needham and Company -- Analyst

OK. Thank you.

Jayshree Ullal -- President and Chief Executive Officer

Thank you, Alex.

Operator

Your next question comes from the line of Matt Niknam with Deutsche Bank. Please go ahead. Your line is open.

Matt Niknam -- Deutsche Bank -- Analyst

Hey, thanks for taking the question. I just want to follow up on the question on macro that was asked earlier. Are there any regions, verticals where you've seen any maybe greater than usual slowness in ordering because of macro? And then maybe if I can sneak one in for Ita. On the free cash flow trajectory, broadly speaking, just curious if there's any broad color you can provide around working capital and primarily asking around inventory and whether that's still a drag or whether you expect to maybe convert some more of that to cash this year.

Thanks.

Ita Brennan -- Chief Financial Officer

Yeah, Maybe I'll take the cash piece of it first. Yeah. I'm not sure that we start to see it kind of come down just yet. I think probably, at least for the first half, we'll probably still be building an inventory.

I mean, we do have some kind of key components that are still, you know, long lead time and where we wanted to build buffers. So we'll continue to do that. And then, hopefully, the second half is probably at least kind of flattens out. But again, we'll update that as we go quarter by quarter.

But I think there's definitely a piece, but that's still going to be a long lead time that will kind of hold inventory a little bit higher than what we might like for the time being.

Jayshree Ullal -- President and Chief Executive Officer

And then a question on macro, like I said before, we'll call it when we see it. We're not seeing anything major and significant yet. And, you know, customers are watching, we're watching, and no major trend I can point to.

Matt Niknam -- Deutsche Bank -- Analyst

That's great. Thank you.

Liz Stine -- Director, Investor Relations

Thanks, Matt.

Operator

Your next question comes from the line of Tim Long with Barclays. Please go ahead. Your line is open.

Tim Long -- Barclays -- Analyst

Thank you. Just kind of a two-parter on the campus business. First, I think you guys have talked about doing a little bit better in the wireless LAN area. So curious if you think that having a better wired and wireless portfolio kind of accelerates the share gains potential in that area.

Was that something that was maybe holding back some wins that could help in the future? And then secondly, I think at the Analyst Day, you talked a little bit about SD-WAN. I'm just curious if you can give us an update on when you might start to see another leg to the campus strategy in what's a pretty high-growth vertical. Thank you.

Jayshree Ullal -- President and Chief Executive Officer

Sure. So, Tim, on the wired and wireless, we are obviously much stronger on wired because there's a very natural affinity to the Arista EOS tech. So -- and we also have a full portfolio of 1RU, 2RU, all the way to a chassis with built-in encryption. No other company maybe, except one, has that.

So we're very competitive there. On the wireless, just sort of the new kid on the block. As I said, if you just look at our campus entry, we are the new kid on the block. This is our third year.

So we, I think, are going from being a toddler to an adult now here very soon. So we believe we have a strong portfolio, also differentiated by CloudVision for both wired and wireless coming into the same spine-spline architecture that we articulate and designed for the data center. So we feel very, very good about our portfolio being strong. I think more of our efforts will go into go to market and reaching these customers because much of what we've done to date is, if you will, low-hanging fruit with our familiar customers and our existing base.

Operator

Your next question comes from the line of Ittai Kidron with Oppenheimer. Please go ahead. Your line is open.

Ittai Kidron -- Oppenheimer and Company -- Analyst

Thanks. And nice finish for the year, ladies. Couple of questions for me. First of all, for you, Ita, on the cash, just want to piggyback on some of the previous question on the account receivables.

Clearly, they've ballooned here on the year. Are the cash payment terms of the cloud guys any different than a normal enterprise? And what percent of this account receivable do you think you can recoup in the year? And then for you, Jayshree, on campus. Clearly, supply chain is a little bit of a hurdle there. Cisco's taken action to redesign some of its solutions to products and components that are much more readily available.

Is that not a path for you? And if it is, what can you do on that front to alleviate the supply chain and more easily address demand?

Ita Brennan -- Chief Financial Officer

Ittai, maybe I'll take the cash one first. I mean, a lot of the DSO growth is really around those service renewals that we saw at the back end of the quarter. You know, if you think about those and how they flow, they generate almost no revenue. But obviously, they're in AR, they're multiyear.

So it causes the AR to spike. We'll collect kind of a lot of that in Q1. Good, healthy AR and we're about target heading into Q1. So there's no change in aging or anything else.

It's really just the timing of those service renewals and the fact that they end up in AR at the end of the quarter.

Jayshree Ullal -- President and Chief Executive Officer

Yeah, so, Ittai, on the -- thank you for the wishes. by the way, and happy Valentine's Day. We listen to you and make sure the earnings call was not on Valentine's Day. So to answer your question, absolutely, we have our choice of vendors and redesigns.

Redesigns take time and qualifying them with our customer takes even longer. So we've chosen to adopt multi-track approach where we do have redesigns that we can invoke, but we are also improving our relationship and partnership with our supply chain vendors. Anshul, your team has been working on that. I think your vendor list has gone from tens to hundreds, if I remember right.

Anshul Sadana -- Chief Operating Officer and Senior Vice President

That's right, Jayshree. It's the first time we're close to almost 200 suppliers. But we talk to them directly. Even if we don't buy the components from them, we control the relationship and the technology and the road map.

Jayshree Ullal -- President and Chief Executive Officer

So to answer your question in the campus specifically, both with redesigns and with our the supplier partnerships, we fully expect to come back and not fall short of our numbers in '23.

Ittai Kidron -- Oppenheimer and Company -- Analyst

Very good. Thanks. Good luck.

Jayshree Ullal -- President and Chief Executive Officer

Thank you, Itta.

Operator

Our next question will come from the line of Ben Bollin with Cleveland Research. Please go ahead. Your line is open.

Ben Bollin -- Cleveland Research Company -- Analyst

Thanks for taking the question. Good afternoon, everyone. I also wanted to piggyback a little bit on campus. Jayshree, could you talk a little bit about how customers are responding as they're facing the increase in lead times or the lead times overall? It's been a market share opportunity.

Any risk that that share is perishable, do they choose to opt to renew with who they have? And then you talked a little bit about go to market on campus. What are you doing differently or what are your thoughts on where that goes from here? Thank you.

Jayshree Ullal -- President and Chief Executive Officer

Yeah, now, both are very good questions, Ben. I would say, currently, we are gaining share because others are messing up. You know, whether it's changing to a software model or not able to supply, Arista has been the benefactor of that. And it's still small numbers, obviously, but it's difficult to imagine that we're at risk of losing share when we have such a small share.

Our goal is to grow share at the moment. And what is your second question? The second part of that question.

Ben Bollin -- Cleveland Research Company -- Analyst

Go to market strategy.

Jayshree Ullal -- President and Chief Executive Officer

Oh, what is the go to market. Well, in the near term, my go to market has very much been to target our 9,000 cumulative customers. But we are building mid-market strategy. We are going to work closely with channel partners.

Those things take time. So I would say our initial go to market is our enterprise customers. And over time, we will have a more mid-market strategy.

Ben Bollin -- Cleveland Research Company -- Analyst

Thanks.

Operator

Your next question comes from the line of James Fish with Piper Sandler. Please go ahead. Your line is open.

James Fish -- Piper Sandler -- Analyst

Hey, happy Valentine's Day, ladies. Great quarter. Just going back to your commentary on cloud titans being kind of between '21 and '22 levels. Just given the overall growth, it does suggest a bit of an acceleration for everybody else.

I guess what's driving that confidence? Is it just mainly what's in backlog, additional hyperscale or wins, including with AI or enterprise share gains or something else? And then, Ita, just for you, as a follow-up on the cash flow. Is there a way to think about kind of a normalized cash flow level or where you expect the inventory turns to get to by the end of the year? Thanks.

Ita Brennan -- Chief Financial Officer

Yeah, maybe I'll take that one first. Jim, I'm not quite ready yet to call kind of a turns number for the end of the year. I think inventory dollars probably grow certainly through the first half, and then hopefully, we can we can flatten out from there. Yeah, we will look for optimization, but there is still a fair amount of kind of long lead time items that we need to kind of carry and buffer.

So I'll come back to you as we kind of go through the year. But I think certainly for the first half you should be looking for inventory to probably continue to grow on an absolute dollar basis.

Jayshree Ullal -- President and Chief Executive Officer

Thank you, James, for the wishes. I think, in one word, I would say momentum. Our enterprise customers are really looking for an alternative to what they've got. There's a lot of fatigue in the system.

And what's driving that optimism, whether it's, you know, backlog from prior demand or present demand, is they're really hungry, and Arista presents that alternative.

Liz Stine -- Director, Investor Relations

Next question, operator.

Operator

Your next question comes from the line of David Vogt with UBS. Please go ahead. Your line is open.

David Vogt -- UBS -- Analyst

Great. Thank you, everyone, for taking my call. I just want to pivot back to Meta for a second. And so in addition to the new architecture that they've been talking about, and I think Anshul just did, the company also talked about, you know, potentially using more co-location and maybe other public company assets to kind of meet its capital intensity needs going forward.

We just love to kind of get your thoughts on how that impacts your spending on Arista gear going forward. And then just on going also on titans mix percentages, you know, if the rest of the business is growing at the rates that we think it's going to go in 2023 and to end up somewhere between the '21 and '22 level, does that suggest that the titans' business in total grows kind of in the low teens in '23 off of, you know, triple-digit growth in '22? Thanks.

Jayshree Ullal -- President and Chief Executive Officer

Well, just to answer that one, it is definitely not going to be triple digit in '23. You can say that with certainty. That was a beautiful year and one for the history books. Anshul you want to take the rest?

Anshul Sadana -- Chief Operating Officer and Senior Vice President

Sure. On the Meta question, David, on the architecture and so on, I think the high-level message to us is they want to run the business efficiently, as efficiently as possible, and optimized. So projects that are nice to have, obviously, those are getting cut back. And as you mentioned, things like co-lo and so on, you don't need a very large architecture to start with if you only have a three-megawatt site, as an example, you have a smaller cluster size.

But our products already fit very well in all of these use cases. So we don't believe there's any significant impact to networking from what we can tell today in the near term, but we don't have visibility. That's many, many years out today. But the message we've been given is basically no big impact on networking as far as we are concerned.

David Vogt -- UBS -- Analyst

Great.

Operator

Our next question comes from the line of Tom Blakey with KeyBanc Capital Markets. Please go ahead. Your line is open.

Tom Blakey -- KeyBanc Capital Markets -- Analyst

Yeah. Thanks for squeezing me in here. I have a question back on the F&E line, financials and enterprise. The drivers there, I think, maybe Tal was getting at many questions ago.

But I was wondering how much like rip and replace type of wins are kind of like starting to rear into here. This -- implied, in my mind anyway, an acceleration in growth and the growth in the F&E line. And specifically the new Cloud Test product that you launched at the end of last year, if that's kind of more of a 2023 driver and, again, that kind of rip and replace type of wins, which is a large opportunity, and enterprise is more of a '23 driver or if it's more at '24. And then maybe just quick for Ita.

As enterprise mixes up, just remind us what the gross margin and operating margin impact should be for mixing more toward enterprise. That'll be helpful. Thank you.

Ita Brennan -- Chief Financial Officer

Yeah, maybe I'll take that one quickly. You know, the gross margins, we kind of talked about it improving as we go through the year and kind of the mix is obviously part of that. Operating margin, it's pretty neutral actually between cloud versus the rest. So I don't know if there's any big driver there.

Jayshree Ullal -- President and Chief Executive Officer

We have much lower sales in marketing on the cloud, more technically driven. So it's not the same. Going back to your rip and replace for financial, I think it definitely means financials and enterprise, just to clarify.

Tom Blakey -- KeyBanc Capital Markets -- Analyst

Yeah. Yeah, exactly. And just talking specifically about the new Cloud Test product where you can emulate, you know, an existing network and then just kind of plug and play the Arista product over an existing install.

Jayshree Ullal -- President and Chief Executive Officer

OK, so what are the common threads we're seeing in enterprise and financials is that they want that nobody is getting more staff to do their job. And so they want more tools to automate and bring their SecOps, DevOps, NetOps, all of their operations together. And this is where the Arista introduction [Inaudible] you know, continuous integration, continuous design, and continuous test has really been strategic because not only do you have to give them a tool for automation, but you also have to work with them and train and teach them how to deploy it. So these end up not necessarily being ripped and replaced, but sort of a gradual evolution where they'll identify the first use case of first data center that they'll do this on, and then it'll expand, land and expand to more use cases.

So most enterprises are not a rip and replace, but it's a use case that we begin with and then gradually evolve to, you know -- go into a rip and replace as their depreciation gets completed on the existing legacy gear. So it's a multiyear type of deployment, and it usually begins with a couple of use cases. Thanks, Tom.

Tom Blakey -- KeyBanc Capital Markets -- Analyst

Thank you, Jayshree.

Thank you, Tom.

Operator

Your next question comes from the line of Erik Suppiger with JMP Securities. Please go ahead. Your line is open.

Erik Suppiger -- JMP Securities -- Analyst

Yeah. Thanks for fitting me in. And happy Valentine's. On the Meta front, I'm just curious.

They talked about adopting more of a modular, kind of scalable architecture. I'm wondering if that changes any of the buying behavior or the purchasing patterns. Does that smooth out some of the purchasing from the likes of Meta? And then secondly, Ita, on the balance sheet, with your purchase commitments, do you have control over how much inventory you take on? Or as the inventory becomes available, do you get -- do you take it in, in which case, might we see your inventory balloon if more of the inventory becomes available?

Ita Brennan -- Chief Financial Officer

Yeah. No, I think I don't like balloon as a word. I mean, there are certain suppliers where lead times are still [Inaudible] inventory. So we'll continue to do that.

I think on the purchase commitments, you know, we talked about this a little bit at the Analyst Day as well. I mean, as lead times start to move around, obviously we'll work with [Inaudible]. And that's why, I mean, over time, that number should come down as [Inaudible] lead time with the contract manufacturers.

Erik Suppiger -- JMP Securities -- Analyst

OK.

Anshul Sadana -- Chief Operating Officer and Senior Vice President

And on the Meta question, the Meta architecture already is quite modular. We've talked about [Inaudible] design [Inaudible] 7388. It can go up to 256-way ECMP. [Inaudible] The cluster side is smaller.

They don't need 256. Maybe they can start with 16 or 32. So we already built into the models to date. I don't believe it has any impact on us.

Same thing on the 7800 AI spine. They can add a number of line cards based on the number of tubules or racks they are connected to. So we are very, very efficient already [Inaudible] very, very [Inaudible].

Liz Stine -- Director, Investor Relations

Thank you, Erik. Operator, next question, please.

Operator

Your next question comes from the line of Sami Badri with Credit Suisse. Please go ahead. Your line is open.

Sami Badri -- Credit Suisse -- Analyst

Great. Jayshree and Ita, two quick ones. First one is for Ita. Can we just talk about the benefits of pricing from some of the price increases that you guys have put through the portfolio and the effect it had on gross margins? And then the second question is for Jayshree. Jayshree, you've given us kind of a ballpark visibility, I guess, some kind of quantification in a number of months that you see visibility with some of your biggest customers.

Could you give us an update on that same type of visibility?

Ita Brennan -- Chief Financial Officer

Yeah, I think that on the pricing piece of it, I mean, for sure we're getting some benefit from the pricing. But, you know, as time goes on, it starts -- in the dynamic environment, that's be harder to track. That kind of gets lost in the overall growth in the business. But -- you know, but we did check and there's definitely some uptick for pricing there.

And it's just not something that we're kind of tracking on an ongoing basis.

Jayshree Ullal -- President and Chief Executive Officer

And in terms of visibility, Sami, in the past, we've seen as much as a year's visibility. If I were to guess, I think as the lead times improved, that visibility was reduced. Maybe it's down to three quarters now. And the visibility was very much tied to planning cycles.

And then the planning cycles were longer than a year because our lead times were longer than a year and that then we got greater visibility.

Liz Stine -- Director, Investor Relations

Thank you, Sami.

Sami Badri -- Credit Suisse -- Analyst

Got it.

Operator

Your next question comes from the line of George Notter with Jefferies. Please go ahead. Your line is open.

George Notter -- Jefferies -- Analyst

Hi there. I'm curious about why you guys think you should take share from InfiniBand going forward in a AI and HPC environment? I'm just just curious about what the logic is there. Thanks.

Jayshree Ullal -- President and Chief Executive Officer

Yeah. So it is -- there's two big reasons. I think in the past, Ita and I were always [Inaudible] about the performance and bandwidth to InfiniBand. Today as you start talking about 400 to 800, 1.2-terabit, the options that are needed are much greater and very cost effective and everybody [Inaudible].

The other is I think, historically, [Inaudible] for more high-performance compute use cases. We are very bullish on the AI workloads and its impact on Ethernet, but we don't believe InfiniBand has any particular advantage, and in fact, Ethernet does.

Liz Stine -- Director, Investor Relations

Thank you, George. Operator, we have time for one last question.

Operator

Your final question comes from the line of Simon Leopold with Raymond James. Please go ahead. Your line is open.

Simon Leopold -- Raymond James -- Analyst

Thanks for taking it. I wanted to maybe dig a little bit into the campus business, particularly whether or not that unit has been more constrained and therefore, in a recovery, bounces back. And ultimately, wondering if really -- an increase in campus in the mix, I know you gave us at 750 million target by '25. Wondering if that's considered a headwind to gross margin, or whether it's more about the market verticals that affects your margins.

Thank you.

Jayshree Ullal -- President and Chief Executive Officer

Yeah. No headwind to gross margin. Our campus business has good gross margins. I just -- you know, as we said on the product side, I feel very good that the campus can execute.

On the go-to-market side, we have more work. So I'm giving ourselves some optionality there that if we do the work really well, we could exceed the 750. And if we can't, then that would be the more likely number.

Liz Stine -- Director, Investor Relations

Great. Thanks, Simon. This concludes the Arista Networks fourth-quarter 2022 earnings call. We have posted a presentation which provides additional information on our results, which you can access on the investor section of our website.

Thank you for joining us today and thank you for your interest in Arista.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Liz Stine -- Director, Investor Relations

Jayshree Ullal -- President and Chief Executive Officer

Anshul Sadana -- Chief Operating Officer and Senior Vice President

Ita Brennan -- Chief Financial Officer

Jason Ader -- William Blair and Company -- Analyst

Amit Daryanani -- Evercore ISI -- Analyst

Paul Silverstein -- Cowen and Company -- Analyst

Aaron Rakers -- Wells Fargo Securities -- Analyst

Jim Suva -- Citi -- Analyst

Samik Chatterjee -- JPMorgan Chase and Company -- Analyst

Tal Liani -- Bank of America Merrill Lynch -- Analyst

Fahad Najam -- Loop Capital Markets -- Analyst

Pierre Ferragu -- New Street Research -- Analyst

Mike Genovese -- Rosenblatt Securities -- Analyst

Meta Marshall -- Morgan Stanley -- Analyst

Alex Henderson -- Needham and Company -- Analyst

Matt Niknam -- Deutsche Bank -- Analyst

Tim Long -- Barclays -- Analyst

Ittai Kidron -- Oppenheimer and Company -- Analyst

Ben Bollin -- Cleveland Research Company -- Analyst

James Fish -- Piper Sandler -- Analyst

David Vogt -- UBS -- Analyst

Tom Blakey -- KeyBanc Capital Markets -- Analyst

Erik Suppiger -- JMP Securities -- Analyst

Sami Badri -- Credit Suisse -- Analyst

George Notter -- Jefferies -- Analyst

Simon Leopold -- Raymond James -- Analyst

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