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Arista (ANET) Beats Q2 Earnings Estimates on Record Revenues
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Arista Networks, Inc. (ANET - Free Report) reported solid second-quarter 2023 results, with record revenues driven by healthy demand trends. Easing supply chain woes and steady customer additions backed by the company’s best-in-class portfolio strength ensured a top-line expansion year over year. Both the bottom and the top line beat the respective Zacks Consensus Estimate.
Net Income
GAAP net income in the reported quarter rose to $491.9 million or $1.55 per share from $299.1 million or 94 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 $501.2 million or $1.58 per share compared with $342.7 million or $1.08 per share in the year-earlier quarter. The bottom line beat the Zacks Consensus Estimates by 14 cents.
Arista Networks, Inc. Price, Consensus and EPS Surprise
During the quarter, revenues surged to $1,458.9 million from $1,051.9 million 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 meet the rising demands of AI/ML driven network architectures and unveiled the WAN routing system. These innovations enabled Arista to deliver a superior customer experience and increase customer engagement while surpassing 75 million cumulative cloud networking ports. The top line beat the consensus estimate of $1,380 million.
Net sales from Product totaled $1,261.5 million compared with $885.8 million in the year-ago quarter. It exceeded our estimate of $1,164.3 million. Service revenues increased to $197.4 million from $166.1 million in the prior-year quarter but fell short of our estimates of $211.9 million. Arista witnessed positive demand trends owing to its strong product portfolio that is highly scalable, programmable and provides data-driven automation, analytics and world-class support services.
Net sales from the Americas contributed 79% to total revenues, while international revenues accounted for the remainder. Healthy contributions from enterprise customers in EMEA and APAC regions supported the top-line growth in the international market. Driven by its innovation, Arista continues to maintain a strong leadership position in the Data Center and Cloud Networking vertical.
Other Details
Non-GAAP gross profit rose to $893.8 million from $651.6 million, with non-GAAP gross margin of 61.3% and 61.9%, respectively. The margin was in line with the company’s guidance.
Total operating expenses were $354.1 million, up from $280.4 million in the year-ago quarter. Research & development costs rose to $229.7 million from $178.2 million. Sales and marketing expenses also increased to $98 million from $79.4 million due to a rise in headcount, new product introduction costs and higher variable compensation expenditures.
Cash Flow & Liquidity
In the first six months of 2023, Arista generated $808.6 million of net cash from operating activities compared with $318.2 million in the prior-year period. As of Jun 30, 2023, the company had $1,261.8 million in cash and cash equivalents and $61.5 million in other long-term liabilities. Arista repurchased common stock worth $30 million at an average price of $137.2 per share in the quarter.
Outlook
For the third quarter of 2023, management expects revenues in the range of $1.45-$1.5 billion. Non-GAAP gross margin is estimated at 62% and non-GAAP operating margin is approximated at 41%.
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. It expects a steady improvement in gross margin owing to the optimization of manufacturing output.
Here are some better-ranked stocks from the broader industry.
InterDigital, Inc. (IDCC - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 170.89%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 579.03%. It has a long-term earnings growth expectation of 13.9%.
It is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. The company engages in designing and developing a wide range of advanced technology solutions, which are used in digital cellular and wireless 3G, 4G and IEEE 802-related products and networks.
Akamai Technologies, Inc. (AKAM - Free Report) , carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 4.9%, on average, in the trailing four quarters. It has a long-term earnings growth expectation of 10%.
Akamai is a global provider of content delivery network and cloud infrastructure services. The company’s solutions accelerate and improve the delivery of content over the Internet, enabling faster response to requests for web pages, streaming of video & audio, business applications, etc. Akamai’s offerings are intended to reduce the impact of traffic congestion, bandwidth constraints and capacity limitations on customers.
Motorola Solutions, Inc. (MSI - Free Report) carries a Zacks Rank #2. It has a long-term earnings growth expectation of 9% and delivered an earnings surprise of 6.9%, on average, in the trailing four quarters.
As a leading provider of mission-critical communication products and services worldwide, Motorola has ensured a steady revenue stream from this niche market. The communications equipment maker intends to boost its position in the public safety domain by entering into strategic alliances with other players in the ecosystem.
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Arista (ANET) Beats Q2 Earnings Estimates on Record Revenues
Arista Networks, Inc. (ANET - Free Report) reported solid second-quarter 2023 results, with record revenues driven by healthy demand trends. Easing supply chain woes and steady customer additions backed by the company’s best-in-class portfolio strength ensured a top-line expansion year over year. Both the bottom and the top line beat the respective Zacks Consensus Estimate.
Net Income
GAAP net income in the reported quarter rose to $491.9 million or $1.55 per share from $299.1 million or 94 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 $501.2 million or $1.58 per share compared with $342.7 million or $1.08 per share in the year-earlier quarter. The bottom line beat the Zacks Consensus Estimates by 14 cents.
Arista Networks, Inc. Price, Consensus and EPS Surprise
Arista Networks, Inc. price-consensus-eps-surprise-chart | Arista Networks, Inc. Quote
Revenues
During the quarter, revenues surged to $1,458.9 million from $1,051.9 million 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 meet the rising demands of AI/ML driven network architectures and unveiled the WAN routing system. These innovations enabled Arista to deliver a superior customer experience and increase customer engagement while surpassing 75 million cumulative cloud networking ports. The top line beat the consensus estimate of $1,380 million.
Net sales from Product totaled $1,261.5 million compared with $885.8 million in the year-ago quarter. It exceeded our estimate of $1,164.3 million. Service revenues increased to $197.4 million from $166.1 million in the prior-year quarter but fell short of our estimates of $211.9 million. Arista witnessed positive demand trends owing to its strong product portfolio that is highly scalable, programmable and provides data-driven automation, analytics and world-class support services.
Net sales from the Americas contributed 79% to total revenues, while international revenues accounted for the remainder. Healthy contributions from enterprise customers in EMEA and APAC regions supported the top-line growth in the international market. Driven by its innovation, Arista continues to maintain a strong leadership position in the Data Center and Cloud Networking vertical.
Other Details
Non-GAAP gross profit rose to $893.8 million from $651.6 million, with non-GAAP gross margin of 61.3% and 61.9%, respectively. The margin was in line with the company’s guidance.
Total operating expenses were $354.1 million, up from $280.4 million in the year-ago quarter. Research & development costs rose to $229.7 million from $178.2 million. Sales and marketing expenses also increased to $98 million from $79.4 million due to a rise in headcount, new product introduction costs and higher variable compensation expenditures.
Cash Flow & Liquidity
In the first six months of 2023, Arista generated $808.6 million of net cash from operating activities compared with $318.2 million in the prior-year period. As of Jun 30, 2023, the company had $1,261.8 million in cash and cash equivalents and $61.5 million in other long-term liabilities. Arista repurchased common stock worth $30 million at an average price of $137.2 per share in the quarter.
Outlook
For the third quarter of 2023, management expects revenues in the range of $1.45-$1.5 billion. Non-GAAP gross margin is estimated at 62% and non-GAAP operating margin is approximated at 41%.
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. It expects a steady improvement in gross margin owing to the optimization of manufacturing output.
Zacks Rank & Stock to Consider
Arista currently has a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Here are some better-ranked stocks from the broader industry.
InterDigital, Inc. (IDCC - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 170.89%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 579.03%. It has a long-term earnings growth expectation of 13.9%.
It is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. The company engages in designing and developing a wide range of advanced technology solutions, which are used in digital cellular and wireless 3G, 4G and IEEE 802-related products and networks.
Akamai Technologies, Inc. (AKAM - Free Report) , carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 4.9%, on average, in the trailing four quarters. It has a long-term earnings growth expectation of 10%.
Akamai is a global provider of content delivery network and cloud infrastructure services. The company’s solutions accelerate and improve the delivery of content over the Internet, enabling faster response to requests for web pages, streaming of video & audio, business applications, etc. Akamai’s offerings are intended to reduce the impact of traffic congestion, bandwidth constraints and capacity limitations on customers.
Motorola Solutions, Inc. (MSI - Free Report) carries a Zacks Rank #2. It has a long-term earnings growth expectation of 9% and delivered an earnings surprise of 6.9%, on average, in the trailing four quarters.
As a leading provider of mission-critical communication products and services worldwide, Motorola has ensured a steady revenue stream from this niche market. The communications equipment maker intends to boost its position in the public safety domain by entering into strategic alliances with other players in the ecosystem.