Arista (ANET) Beats Q4 Earnings Estimates on Solid Revenues
Arista Networks, Inc. ANET reported healthy fourth-quarter 2023 results, with solid revenues driven by robust 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 lines beat the respective Zacks Consensus Estimate.
Net Income
GAAP net income in the reported quarter improved to $613.6 million or $1.92 per share from $427.1 million or $1.35 per share in the year-ago quarter. The improvement was mainly propelled by higher net sales.
On a non-GAAP basis, net income was record high at $664.3 million or $2.08 per share compared with $445.1 million or $1.41 per share in the year-earlier quarter. The bottom line beat the Zacks Consensus Estimates by 37 cents.
Arista Networks, Inc. Price, Consensus and EPS Surprise
Arista Networks, Inc. price-consensus-eps-surprise-chart | Arista Networks, Inc. Quote
For 2023, GAAP net income was up to $2.09 billion or $6.58 per share from $1.35 billion or $4.27 per share in 2022, driven by top-line growth. On a non-GAAP basis, net income for 2023 was $2.2 billion or $6.94 per share compared with $1.45 billion or $4.58 per share in 2022.
Revenues
During the quarter, revenues surged to $1.54 billion from $1.28 billion in the prior-year quarter, owing to an improvement in component supply that enhanced the manufacturing output consistency and healthy contributions from enterprise customers in the EMEA region.
The company introduced various solutions for cloud, Internet service providers and enterprise networks to meet the rising demands of AI/ML-driven network architectures. These innovations enabled Arista to deliver a superior customer experience and increase customer engagement. The top line beat the consensus estimate of $1.53 billion. For 2023, revenues were up to $5.86 billion from $4.38 billion in 2022.
Net quarterly sales from Product totaled $1.31 billion compared with $1.1 billion in the year-ago quarter. Service revenues increased to $230.1 million from $178.7 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 77.7% to total revenues, while international revenues accounted for the remainder. Healthy contributions from enterprise customers in the EMEA region supported the top-line growth in the international market. Driven by its innovation, Arista maintains a strong leadership position in the Data Center and Cloud Networking vertical.
Other Details
Non-GAAP gross profit rose to $1.01 billion from $778.5 million, with non-GAAP gross margin of 65.4% and 61%, respectively. The margin was above the company’s guidance.
Total operating expenses were $359.3 million, up from $299.7 million in the year-ago quarter. Research & development costs rose to $211.5 million from $190.4 million. Sales and marketing expenses also increased to $105.5 million from $85.4 million due to a rise in headcount, new product introduction costs and higher variable compensation expenditures.
Cash Flow & Liquidity
In 2023, Arista generated $2.03 billion of net cash from operating activities compared with $492.8 million in 2022. As of Dec 31, 2023, the company had $1.94 billion in cash and cash equivalents and $131.4 million in other long-term liabilities compared with respective tallies of $671.7 million and $102.4 million a year ago.
Outlook
For the first quarter of 2024, management expects revenues in the range of $1.52-$1.56 billion. Non-GAAP gross margin is estimated at 62% and non-GAAP operating margin is approximated at 42%.
The company expects further easing of supply chain anomalies and an improvement in lead time in 2024. 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 & Other Stocks to Consider
Arista currently has a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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