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Arista Networks (ANET) Up 29.2% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Arista Networks (ANET - Free Report) . Shares have added about 29.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Arista Networks due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Arista Tops Q1 Earnings Estimates on Solid Revenues
Arista reported impressive first-quarter 2023 results, with the bottom and the top line beating their respective Zacks Consensus Estimate. Strong performance in Data Center and Cloud Networking businesses, easing supply chain woes and healthy customer additions backed by the company’s best-in-class portfolio strength ensured a top-line expansion year over year.
Net Income
GAAP net income in the reported quarter rose to $436.5 million or $1.38 per share from $272.3 million or 85 cents per share in the year-ago quarter. The improvement was mainly propelled by higher net sales.
On a non-GAAP basis, net income was $452.5 million or $1.43 per share compared with respective figures of $ 268.5 million or 84 cents per share reported in the year-ago quarter. The bottom line beat the Zacks Consensus Estimates by 8 cents.
Revenues
During the quarter, revenues surged to $1,351.3 million from $877.1 million reported in the prior-year quarter, owing to an improvement in component supply that enhanced the manufacturing output consistency. The company introduced various solutions for cloud, Internet service providers and enterprise networks to match the rising demands of AI/ML driven network architectures and unveiled WAN routing system. These innovations enabled Arista to deliver a superior customer experience and increase customer engagement. The top line beat the consensus estimate of $1,306 million.
Net sales from Product totaled at $1,172.1 million compared with $724.7 million in the year-ago quarter. Service revenues increased to $179.3 million from $152.3 million reported in the prior-year quarter. Arista witnessed positive demand trends owing to its strong product portfolio that are highly scalable, programmable and provide data-driven automation, analytics and world class support services.
Net sales from the Americas contributed 82.5% to total revenues. Revenues from the international market stood at $236 million, contributing 17.5% to total revenues. Healthy demand in cloud networks supported the top-line growth in the domestic market. Driven by its innovation, Arista continues to maintain a strong leadership position in Data Center and Cloud Networking vertical.
Other Details
Non-GAAP gross profit rose to $814.3 million from $560.9 million, with a gross margin of 60.3% and 63.9%, respectively. The margin is line with company’s guidance.
Total operating expenses were $319.9 million, up from $275.9 million reported in the year-ago quarter. Research & development costs rose to $201.4 million from $172 million. Sales and marketing expenses also increased by 15.8% year over year to $93.5 million due to an increase in headcount, new product introduction costs and higher variable compensation expenditures.
Cash Flow & Liquidity
In first-quarter 2023, Arista generated $374.5 million of net cash from operating activities. As of Mar 31, 2023, the company had $956.3 million in cash and cash equivalents and $58.3 million in long-term liabilities. Arista repurchased common stock worth $82.3 million at an average price of $111.9 per share in the quarter.
Outlook
For the second quarter of 2023, management expects revenues in the range of $1.35-$1.4 billion. Non-GAAP gross margin is estimated at 61% and non-GAAP operating margin is approximated at 40%. Effective tax rate is approximated at 21.5% with 317 million shares.
The company expects further easing of supply chain anomalies and an improvement in lead time. However, it anticipates a moderation in consumer spending, mainly for cloud titan customers. ANET expects a steady improvement in gross margin owing to the optimization of manufacturing output.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
Currently, Arista Networks has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Arista Networks has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Arista Networks (ANET) Up 29.2% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Arista Networks (ANET - Free Report) . Shares have added about 29.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Arista Networks due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Arista Tops Q1 Earnings Estimates on Solid Revenues
Arista reported impressive first-quarter 2023 results, with the bottom and the top line beating their respective Zacks Consensus Estimate. Strong performance in Data Center and Cloud Networking businesses, easing supply chain woes and healthy customer additions backed by the company’s best-in-class portfolio strength ensured a top-line expansion year over year.
Net Income
GAAP net income in the reported quarter rose to $436.5 million or $1.38 per share from $272.3 million or 85 cents per share in the year-ago quarter. The improvement was mainly propelled by higher net sales.
On a non-GAAP basis, net income was $452.5 million or $1.43 per share compared with respective figures of $ 268.5 million or 84 cents per share reported in the year-ago quarter. The bottom line beat the Zacks Consensus Estimates by 8 cents.
Revenues
During the quarter, revenues surged to $1,351.3 million from $877.1 million reported in the prior-year quarter, owing to an improvement in component supply that enhanced the manufacturing output consistency. The company introduced various solutions for cloud, Internet service providers and enterprise networks to match the rising demands of AI/ML driven network architectures and unveiled WAN routing system. These innovations enabled Arista to deliver a superior customer experience and increase customer engagement. The top line beat the consensus estimate of $1,306 million.
Net sales from Product totaled at $1,172.1 million compared with $724.7 million in the year-ago quarter. Service revenues increased to $179.3 million from $152.3 million reported in the prior-year quarter. Arista witnessed positive demand trends owing to its strong product portfolio that are highly scalable, programmable and provide data-driven automation, analytics and world class support services.
Net sales from the Americas contributed 82.5% to total revenues. Revenues from the international market stood at $236 million, contributing 17.5% to total revenues. Healthy demand in cloud networks supported the top-line growth in the domestic market. Driven by its innovation, Arista continues to maintain a strong leadership position in Data Center and Cloud Networking vertical.
Other Details
Non-GAAP gross profit rose to $814.3 million from $560.9 million, with a gross margin of 60.3% and 63.9%, respectively. The margin is line with company’s guidance.
Total operating expenses were $319.9 million, up from $275.9 million reported in the year-ago quarter. Research & development costs rose to $201.4 million from $172 million. Sales and marketing expenses also increased by 15.8% year over year to $93.5 million due to an increase in headcount, new product introduction costs and higher variable compensation expenditures.
Cash Flow & Liquidity
In first-quarter 2023, Arista generated $374.5 million of net cash from operating activities. As of Mar 31, 2023, the company had $956.3 million in cash and cash equivalents and $58.3 million in long-term liabilities. Arista repurchased common stock worth $82.3 million at an average price of $111.9 per share in the quarter.
Outlook
For the second quarter of 2023, management expects revenues in the range of $1.35-$1.4 billion. Non-GAAP gross margin is estimated at 61% and non-GAAP operating margin is approximated at 40%. Effective tax rate is approximated at 21.5% with 317 million shares.
The company expects further easing of supply chain anomalies and an improvement in lead time. However, it anticipates a moderation in consumer spending, mainly for cloud titan customers. ANET expects a steady improvement in gross margin owing to the optimization of manufacturing output.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
Currently, Arista Networks has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Arista Networks has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.