Arista Networks managed to beat earnings forecasts for its second fiscal quarter of 2020, but those results showed a continued year-over-year drop in revenues and earnings, which drew the wrath of Wall Street.

The vendor reported an 11% drop in revenues, which came in at $541 million for its latest Q2. However, that did come in just slightly above the $540 million high-mark Arista forecast leading into the quarter. And despite a more subtle drop in expenses, net income dropped a more substantial 23% year over year to $144.8 million.

Arista CEO Jayshree Ullal highlighted strong customer demand but explained that supply chain constraints tied to the ongoing COVID-19 pandemic dragged on revenues during the quarter. She said that the vendor “experienced a very strong come back from the cloud titans, but we also had strong traction on all the other four verticals as well.”

However, Ullal said she expects the supply chain drag to continue through the rest of the year.

“We are still experiencing inventory issues,” Ullal said during Arista’s Q2 earnings call. “We have very long lead times, where we have improved – we are improving them, we look to improve them, but we don’t expect it to be back to normal till probably Q4.”

The Q2 financial strain followed a similar Q1 pattern that included a 12% year-over-year drop in revenues.

One financial bright spot for Arista was in its goal of hitting $100 million in campus networking revenue by the end of the quarter. Ullal added that if conditions align, Arista should be able to double that revenue target by the end of 2021.

“While we are pleased with the traction, we believe that our new enterprise prospects will take time, especially in this COVID era,” Ullal said during Arista’s Q2 earnings call. “We remain hopeful and optimistic to double in the next five to six quarters to $200 million … depending on market conditions.”

Arista’s campus networking push is targeted at eating into the market-dominate position held by Cisco in that space.

The company is also confident that it can continue to ward off competitive challenges from both other vendors and changing consumer demands.

“We are not seeing architectural shifts or competitive losses,” Ullel said. “In fact, recent data validates that we are [in the No. 1 spot] for the third consecutive year on 100-gig, and our share is increasing every quarter.”

Looking ahead, Arista CFO Ita Brennan cautiously said Arista expects Q3 revenues to come in between $570 million and $590 million. That caution was tied to the broader economic reality and more specifically Arista’s ability to manage its constrained supply chain.

Investors either had a different take on Arista’s fortunes or wanted to pull out some profits. Arista’s stock was trading down more than 10% early Wednesday, which followed a steep run-up with the stock hitting a new 52-week high of $267.30 per share just ahead of its earnings release.

Arista’s competitive position was recently bolstered by Forrester Research’s latest Wave ranking of the programmable switch market. That report had Arista tagged as a top player in that space alongside rivals Huawei, Juniper Networks, and Nvidia, and ahead of vendors like Cisco, Extreme Networks, and Dell EMC.

Forrester noted Arista had become one of the market’s largest switch vendors based on the flexibility of its EOS operating system.

“Tier-one cloud providers have built their networking infrastructure on this type of platform,” the report states. “Besides enabling customers to choose multiple paths of automation, Arista Networks allows them to deploy EOS on third-party hardware, cloud platforms, and inside containers.”

The vendor last month also rolled out updates to its multi-cloud and cloud-native networking software and added an edge component with CloudEOS Edge.

Arista this morning also announced a deal with Forescout Technologies to develop an open ecosystem that embeds security within the network fabric and delivers full visibility and enforcement of critical enterprise assets. This also includes a focus on a zero-trust architecture to identify IoT devices and make sure that they are assigned to specific segments to reduce security risks.

The deal will see Forescout integrate its platform directly into Arista’s switches and wireless infrastructure. This will include Arista’s Cognitive Campus PoE switches. Forescout will also support Arista’s CloudVision workload orchestration and workflow automation product.