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Can Top-Line Growth Buoy Arista's (ANET) Earnings in Q2?

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Arista Networks, Inc. (ANET - Free Report) is scheduled to report second-quarter 2022 results on Aug 1, after the closing bell. In the last reported quarter, the company delivered an earnings surprise of 3.7%, with the bottom line surpassing the Zacks Consensus Estimate by 3 cents. Arista delivered a trailing four-quarter earnings surprise of 7.4%, on average.

The Santa Clara, CA-based cloud networking company is likely to have recorded higher revenues year over year, supported by overall healthy demand. However, due to COVID-19 adversities, Arista is likely to have experienced some supply-chain issues resulting in extended lead time and constrained shipments.

Factors at Play

During the second quarter, Arista introduced the next-generation 7130 Series Systems for converged ultra-low latency networking, improving customers’ swiftness in connecting multiple devices by reducing power, complexity and costs. The next-generation 7130 Series Systems possess features like lower network latency, supporting demands of financial trading, dynamically composing key FGPA devices to reduce costs, integrating servers and networks and scaling out applications to back large clients and data streams. The company believes this is the perfect solution for customers that combine low-latency, FPGA L2/L3 features, performance and density. These capabilities are likely to have translated into incremental revenues in the quarter.

Arista also launched the extension of its Arista EOS (Extensible Operating System) and CloudVision software to support high-performance switched networks for media and entertainment customers. Dubbed Arista Media Control Service, it is a licensed software service that is built on the indigenous data-driven architecture of Arista EOS and NetDL that help Application Programming Interfaces to dynamically program bandwidth-protected multicast content flows in a highly efficient manner. This is likely to be reflected in the upcoming results.

Management expects to witness continued growth within Enterprise customers with strength in adjacencies, software and services. For the June quarter, the Zacks Consensus Estimate for revenues is pegged at $976 million, indicating a 38% increase from the year-ago quarter’s reported figure. Adjusted earnings per share are pegged at 92 cents, which suggests an improvement from 68 cents recorded in the year-earlier quarter.

Earnings Whispers

Our proven model does not predict an earnings beat for Arista this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%, with both pegged at 92 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Arista Networks, Inc. Price and EPS Surprise

Arista Networks, Inc. Price and EPS Surprise

Arista Networks, Inc. price-eps-surprise | Arista Networks, Inc. Quote

Zacks Rank: Arista currently has a Zacks Rank #3.

Stocks to Consider

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:

Keysight Technologies, Inc. (KEYS - Free Report) is set to release quarterly numbers on Aug 17. It has an Earnings ESP of +1.23% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Qorvo Inc. (QRVO - Free Report) is +0.41% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Aug 3.

The Earnings ESP for Advanced Micro Devices, Inc. (AMD - Free Report) is +1.66% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Aug 2.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.