Arista Networks, Inc. (NYSE: ANET), an industry leader in
data-driven, client-to-cloud networking for large AI, data center,
campus and routing environments, today announced financial results
for its second quarter ended June 30, 2024.
Second Quarter Financial Highlights
“On the heels of our June celebration of 10 years as a public
company, I would again like to thank our customers, employees and
partners for contributing to our success as we arrived at this
important milestone,” said Jayshree Ullal, Chairperson and CEO of
Arista Networks. “Our Q2 2024 financial results demonstrate
Arista's powerful combination of growth, profitability and best of
breed platforms.”
- Revenue of $1.690 billion, an increase of 7.6% compared to the
first quarter of 2024, and an increase of 15.9% from the second
quarter of 2023.
- GAAP gross margin of 64.9%, compared to GAAP gross margin of
63.7% in the first quarter of 2024 and 60.6% in the second quarter
of 2023.
- Non-GAAP gross margin of 65.4%, compared to non-GAAP gross
margin of 64.2% in the first quarter of 2024 and 61.3% in the
second quarter of 2023.
- GAAP net income of $665.4 million, or $2.08 per diluted share,
compared to GAAP net income of $491.9 million, or $1.55 per diluted
share in the second quarter of 2023.
- Non-GAAP net income of $672.6 million, or $2.10 per diluted
share, compared to non-GAAP net income of $501.2 million, or $1.58
per diluted share in the second quarter of 2023.
Commenting on the company's financial results, Chantelle
Breithaupt, Arista’s CFO, said, “We achieved an EPS increase of 33%
in Q2 2024 compared to the same period last year, driven by our
strong revenue and gross margin performance.”
Company Highlights
- Arista Launches Next Generation Multi-Domain Segmentation for
Zero Trust Networking - Arista announced a significant update to
its Arista MSSⓇ (Multi-Domain Segmentation Service) offerings that
address the challenge of creating a truly enterprise-wide zero
trust network. Without the need for endpoint software agents and
proprietary network protocols, Arista MSS enables effective
microperimeters that restrict lateral movement in campus and data
center networks and thus reduces the blast radius of security
breaches such as ransomware.
- Arista Delivers Holistic AI Solutions in Collaboration with
NVIDIA - Arista announced a technology demonstration of AI Data
Centers in order to align compute and network domains as a single
managed AI entity, in collaboration with NVIDIA. In order to build
optimal generative AI networks with lower job completion times,
customers can configure, manage, and monitor AI clusters uniformly
across key building blocks including networks, NICs, and
servers.
- Arista Unveils Etherlink AI Networking Platforms – Arista
announced the Arista Etherlink™ AI platforms, designed to deliver
optimal network performance for the most demanding AI workloads,
including training and inferencing. Powered by new AI-optimized
Arista EOS features, the Arista Etherlink AI portfolio supports AI
cluster sizes ranging from thousands to 100,000s of XPUs with
highly efficient one and 2-tier network topologies that deliver
superior application performance compared to more complex
multi-tier networks while offering advanced monitoring capabilities
including flow-level visibility.
Financial Outlook
For the third quarter of 2024, we expect:
- Revenue between $1.72 billion to $1.75 billion
- Non-GAAP gross margin of approximately 63% - 64%; and
- Non-GAAP operating margin of approximately 44%.
Guidance for non-GAAP financial measures excludes certain items,
including stock-based compensation expense, amortization of
acquisition-related intangible assets, and potential non-recurring
charges or benefits. A reconciliation of non-GAAP guidance measures
to corresponding GAAP measures is not available on a
forward-looking basis without unreasonable effort because these
exclusions can be uncertain or difficult to predict, including
stock-based compensation expense which is impacted by the timing of
employee stock transactions, the company’s future hiring and
retention needs and the future fair market value of the company’s
common stock. The actual amount of these exclusions will have a
significant impact on the company’s GAAP gross margin and GAAP
operating margin.
Prepared Materials and Conference Call Information
Arista's executives will discuss the second quarter 2024
financial results on a conference call at 1:30 p.m. Pacific time
today. To listen to the call via telephone, dial (888) 330-2502 in
the United States or +1 (240) 789-2713 from international
locations. The Conference ID is 5655862.
The financial results conference call will also be available via
live webcast on Arista's investor relations website at
https://investors.arista.com/. Shortly after the conclusion of the
conference call, a replay of the audio webcast will be available on
Arista’s investor relations website.
Forward-Looking Statements
This press release contains “forward-looking statements”
regarding our future performance, including quotations from
management, statements in the section entitled “Financial Outlook,”
such as estimates regarding revenue, non-GAAP gross margin and
non-GAAP operating margin for the third quarter of 2024 and
statements regarding the benefits of Arista's products.
Forward-looking statements are subject to known and unknown risks,
uncertainties, assumptions and other factors that could cause
actual results, performance or achievements to differ materially
from those anticipated in or implied by the forward-looking
statements including risks associated with: large purchases by a
limited number of customers who represent a substantial portion of
our revenue; adverse economic and geopolitical conditions and
conflicts, including inflationary pressures which result in
increased component costs and reduced information technology and
network infrastructure spending, the Russia/Ukraine, Israel/Hamas
conflicts, the Houthi attacks on marine vessels in the Red Sea and
the outcome of the upcoming U.S. presidential election; changes in
our customers technology roadmaps and priorities including the need
for the deployment of artificial intelligence (“AI”) and related
technologies; the impact of sole or limited sources of supply,
supply shortages and extended lead times or supply changes;
volatility in our revenue growth rate; variations in our results of
operations; the rapid evolution of the networking market; failure
to successfully carry out new products and service offerings and
expand into adjacent markets; variability in our gross margins;
intense competition and industry consolidation; expansion of our
international sales and operations; investments in or acquisitions
of other businesses; seasonality and industry cyclicality;
fluctuations in currency exchange rates; failure to raise
additional capital on favorable terms; our inability to attract new
large customers or sell additional products and services to our
existing customers; sales of our switches generating most of our
product revenue; large customers requiring more favorable terms;
inability to increase market awareness or acceptance of our new
products and services; the inclusion of any acceptance provisions
in our customer contracts and any delays in acceptance, or
rejection, of those products; decreases in the sales prices of our
products and services; long and unpredictable sales cycles;
declines in maintenance renewals by customers; product quality
problems; failure to anticipate technological shifts; managing the
supply of our products and product components; our dependence on
third-party manufacturers to build our products; assertions by
third parties of intellectual property rights infringement; failure
or inability to protect or assert our intellectual property rights;
defects, errors or vulnerabilities in our products, the failure of
our products to detect security breaches or incidents, the misuse
of our products or the risks or product liability; enhanced U.S.
tax, tariff, import/export restrictions, Chinese regulations or
other trade barriers; failure to comply with government law and
regulations; issues in the development and use of artificial
intelligence, combined with an uncertain regulatory environment;
and other future events. Additional risks and uncertainties that
could affect us can be found in our most recent filings with the
Securities and Exchange Commission including, but not limited to,
our annual report on Form 10-K and quarterly reports on Form 10-Q.
You can locate these reports through our website at
https://investors.arista.com/ and on the SEC’s website at
https://www.sec.gov/. All forward-looking statements in this press
release are based on information available to the company as of the
date hereof and we disclaim any obligation to publicly update or
revise any forward-looking statement to reflect events that occur
or circumstances that exist after the date on which they were
made.
Non-GAAP Financial Measures
This press release and accompanying table contain certain
non-GAAP financial measures including non-GAAP gross profit,
non-GAAP gross margin, non-GAAP income from operations, non-GAAP
operating margin, non-GAAP net income and non-GAAP diluted net
income per share. These non-GAAP financial measures exclude
stock-based compensation expense, amortization of
acquisition-related intangibles, gains/losses on strategic
investments, and the income tax effect of these non-GAAP
exclusions. In addition, non-GAAP financial measures exclude net
tax benefits associated with stock-based awards, which include
excess tax benefits, and other discrete indirect effects of such
awards. The company uses these non-GAAP financial measures
internally in analyzing its financial results and believes that
these non-GAAP financial measures are useful to investors as an
additional tool to evaluate ongoing operating results and trends.
In addition, these measures are the primary indicators management
uses as a basis for its planning and forecasting for future
periods.
Non-GAAP financial measures are not meant to be considered in
isolation or as a substitute for the comparable GAAP financial
measures. Non-GAAP financial measures are subject to limitations,
and should be read only in conjunction with the company's
consolidated financial statements prepared in accordance with GAAP.
Non-GAAP financial measures do not have any standardized meaning
and are therefore unlikely to be comparable to similarly titled
measures presented by other companies. A description of these
non-GAAP financial measures and a reconciliation of the company’s
non-GAAP financial measures to their most directly comparable GAAP
measures have been provided in the financial statement tables
included in this press release, and investors are encouraged to
review the reconciliation.
About Arista Networks
Arista Networks is an industry leader in data-driven,
client-to-cloud networking for large AI, data center, campus and
routing environments. Its award-winning platforms deliver
availability, agility, automation, analytics, and security through
an advanced network operating stack. For more information, visit
www.arista.com.
ARISTA, MSS, EOS and Etherlink are among the registered and
unregistered trademarks of Arista Networks, Inc. in jurisdictions
around the world. Other company names or product names may be
trademarks of their respective owners.
ARISTA NETWORKS, INC.
Condensed Consolidated Income
Statements
(Unaudited, in thousands,
except per share amounts)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Revenue:
Product
$
1,423,271
$
1,261,537
$
2,752,116
$
2,433,631
Service
267,129
197,387
509,658
376,644
Total revenue
1,690,400
1,458,924
3,261,774
2,810,275
Cost of revenue:
Product
540,393
533,613
1,062,072
1,042,475
Service
52,794
41,182
101,110
79,164
Total cost of revenue
593,187
574,795
1,163,182
1,121,639
Gross profit
1,097,213
884,129
2,098,592
1,688,636
Operating expenses:
Research and development
267,482
229,676
475,877
431,084
Sales and marketing
104,403
97,971
209,483
191,463
General and administrative
25,755
26,420
53,518
51,449
Total operating expenses
397,640
354,067
738,878
673,996
Income from operations
699,573
530,062
1,359,714
1,014,640
Other income (expense), net
70,863
56,339
133,483
68,485
Income before income taxes
770,436
586,401
1,493,197
1,083,125
Provision for income taxes
105,008
94,516
190,077
154,767
Net income
$
665,428
$
491,885
$
1,303,120
$
928,358
Net income per share:
Basic
$
2.12
$
1.59
$
4.16
$
3.02
Diluted
$
2.08
$
1.55
$
4.07
$
2.94
Weighted-average shares used in computing
net income per share:
Basic
313,711
308,636
313,372
307,810
Diluted
319,921
316,485
319,893
316,031
ARISTA NETWORKS, INC.
Reconciliation of Selected
GAAP to Non-GAAP Financial Measures
(Unaudited, in thousands,
except percentages and per share amounts)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
GAAP gross profit
$
1,097,213
$
884,129
$
2,098,592
$
1,688,636
GAAP gross margin
64.9
%
60.6
%
64.3
%
60.1
%
Stock-based compensation expense
3,983
2,824
7,433
5,799
Intangible asset amortization
4,195
6,820
8,390
13,640
Non-GAAP gross profit
$
1,105,391
$
893,773
$
2,114,415
$
1,708,075
Non-GAAP gross margin
65.4
%
61.3
%
64.8
%
60.8
%
GAAP income from operations
$
699,573
$
530,062
$
1,359,714
$
1,014,640
Stock-based compensation expense
79,292
67,127
156,507
130,008
Intangible asset amortization
6,690
9,315
13,380
18,630
Non-GAAP income from operations
$
785,555
$
606,504
$
1,529,601
$
1,163,278
Non-GAAP operating margin
46.5
%
41.6
%
46.9
%
41.4
%
GAAP net income
$
665,428
$
491,885
$
1,303,120
$
928,358
Stock-based compensation expense
79,292
67,127
156,507
130,008
Intangible asset amortization
6,690
9,315
13,380
18,630
Gain on strategic investments
—
(24,743
)
—
(19,172
)
Tax benefits on stock-based awards
(64,548
)
(37,832
)
(135,381
)
(87,894
)
Income tax effect on non-GAAP
exclusions
(14,218
)
(4,519
)
(27,266
)
(16,235
)
Non-GAAP net income
$
672,644
$
501,233
$
1,310,360
$
953,695
GAAP diluted net income per share
$
2.08
$
1.55
$
4.07
$
2.94
Non-GAAP adjustments to net income
0.02
0.03
0.03
0.08
Non-GAAP diluted net income per share
$
2.10
$
1.58
$
4.10
$
3.02
Weighted-average shares used in computing
diluted net income per share
319,921
316,485
319,893
316,031
Summary of Stock-Based Compensation
Expense:
Cost of revenue
$
3,983
$
2,824
$
7,433
$
5,799
Research and development
50,769
41,137
94,557
77,706
Sales and marketing
16,769
15,833
35,670
30,971
General and administrative
7,771
7,333
18,847
15,532
Total
$
79,292
$
67,127
$
156,507
$
130,008
ARISTA NETWORKS, INC.
Condensed Consolidated Balance
Sheets
(Unaudited, in
thousands)
June 30, 2024
December 31, 2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
2,429,031
$
1,938,606
Marketable securities
3,844,923
3,069,362
Accounts receivable, net
1,226,795
1,024,569
Inventories
1,853,776
1,945,180
Prepaid expenses and other current
assets
487,793
412,518
Total current assets
9,842,318
8,390,235
Property and equipment, net
96,282
101,580
Acquisition-related intangible assets,
net
75,388
88,768
Goodwill
268,531
268,531
Deferred tax assets
1,177,172
945,792
Other assets
163,544
151,900
TOTAL ASSETS
$
11,623,235
$
9,946,806
LIABILITIES AND STOCKHOLDERS’
EQUITY
CURRENT LIABILITIES:
Accounts payable
$
297,832
$
435,059
Accrued liabilities
320,071
407,302
Deferred revenue
1,329,450
915,204
Other current liabilities
214,526
152,041
Total current liabilities
2,161,879
1,909,606
Income taxes payable
107,833
95,751
Deferred revenue, non-current
789,336
591,000
Other long-term liabilities
133,379
131,390
TOTAL LIABILITIES
3,192,427
2,727,747
STOCKHOLDERS’ EQUITY:
Common stock
31
31
Additional paid-in capital
2,263,356
2,108,331
Retained earnings
6,182,479
5,114,025
Accumulated other comprehensive income
(loss)
(15,058
)
(3,328
)
TOTAL STOCKHOLDERS’ EQUITY
8,430,808
7,219,059
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY
$
11,623,235
$
9,946,806
ARISTA NETWORKS, INC.
Condensed Consolidated
Statements of Cash Flows
(Unaudited, in
thousands)
Six Months Ended June
30,
2024
2023
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income
$
1,303,120
$
928,358
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, amortization and other
31,112
39,227
Stock-based compensation
156,507
130,008
Noncash lease expense
9,292
9,154
Deferred income taxes
(228,460
)
(130,287
)
Gain on strategic investments
—
(19,172
)
Amortization (accretion) of investment
premiums (discounts)
(27,843
)
(11,998
)
Changes in operating assets and
liabilities:
Accounts receivable, net
(202,226
)
143,370
Inventories
91,404
(574,628
)
Other assets
(92,577
)
(120,864
)
Accounts payable
(136,236
)
114,905
Accrued liabilities
(87,063
)
70,418
Deferred revenue
612,582
43,658
Income taxes, net
74,067
198,100
Other liabilities
(863
)
(11,676
)
Net cash provided by operating
activities
1,502,816
808,573
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from maturities of marketable
securities
952,572
1,265,305
Proceeds from sale of marketable
securities
36,750
21,725
Purchases of marketable securities
(1,749,308
)
(1,392,020
)
Purchases of property and equipment
(12,555
)
(17,212
)
Cash paid for business combinations, net
of cash acquired
—
1,799
Investments in notes and privately-held
companies
(1,000
)
(4,250
)
Net cash used in investing activities
(773,541
)
(124,653
)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of common stock
under equity plans
34,517
30,410
Tax withholding paid on behalf of
employees for net share settlement
(35,999
)
(15,766
)
Repurchases of common stock
(234,666
)
(112,279
)
Net cash used in financing activities
(236,148
)
(97,635
)
Effect of exchange rate changes
(2,692
)
429
NET INCREASE IN CASH, CASH EQUIVALENTS AND
RESTRICTED CASH
490,435
586,714
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
—Beginning of period
1,939,464
675,978
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
—End of period
$
2,429,899
$
1,262,692
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version on businesswire.com: https://www.businesswire.com/news/home/20240730790393/en/
Investor Contacts: Arista Networks, Inc. Liz Stine,
408-547-5885 Investor Relations liz@arista.com
Arista Networks (NYSE:ANET)
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