Arista Networks Reports Strong Q2 Results

by Warren Seah

Arista Networks (ticker: ANET), a leading data center networking hardware provider, has seen a significant increase in its shares following the release of better-than-expected second quarter results.

Last week, Arista shares experienced a decline due to concerns about a potential slowdown in data center infrastructure demand. This worry was fueled by disappointing financial results from rival company Juniper Networks (JNPR), as well as indications of reduced spending from Arista’s two largest customers, Microsoft (MSFT) and Meta Platforms (META).

However, Arista’s recent announcement revealed that the company is witnessing “a return to shorter lead times and reduced visibility.” Despite these challenges, the results exceeded expectations, leading to a positive turnaround for the stock.

As of late trading on Monday, Arista shares were up by 11.6% at $173.10.

Strong Q2 Performance

Arista reported a Q2 revenue of $1.459 billion, marking an 8% increase compared to the previous year. This exceeded the company’s guidance range of $1.35 billion to $1.4 billion. According to FactSet, the Street consensus estimate was $1.378 billion, making Arista’s performance even more impressive. Furthermore, non-GAAP profits reached $1.58 per share, surpassing the Street consensus of $1.44 per share. The company’s GAAP earnings stood at $1.55 per share.

The non-GAAP gross margin for the quarter was 61.3%, in line with the company’s guidance of 61%. Additionally, the non-GAAP operating margin was 41.6%, surpassing the forecasted figure of 40%.

Positive Outlook for Q3 and Beyond

Looking ahead to the September quarter, Arista projects revenue in the range of $1.45 billion to $1.5 billion. Although slightly below the initial Street consensus of $1.48 billion, this projection remains optimistic. Arista also anticipates a non-GAAP gross margin of 62% for Q3, along with a non-GAAP operating margin of 41%.

Furthermore, the company now expects full-year growth of more than 30%, surpassing previous Street estimates of 26.5% growth.

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