ANET Arista Networks

Board of Directors Authorizes Additional $1.2B Stock Repurchase Program

Arista Networks, Inc. (NYSE: ANET), an industry leader in data-driven, client to cloud networking for large data center/AI, campus and routing environments, today announced financial results for its first quarter ended March 31, 2024.

First Quarter Financial Highlights

“Arista is off to a strong start to 2024 with solid first quarter results,” said Jayshree Ullal, Chairperson and CEO of Arista Networks. “As we get ready to celebrate the 10th anniversary of our IPO in June, I am pleased with our progress in the Arista 2.0 journey as seen in breakthrough innovations, customer traction and building our next generation leaders.”

• Revenue of $1.571 billion, an increase of 2.0% compared to the fourth quarter of 2023, and an increase of 16.3% from the first quarter of 2023.
• GAAP gross margin of 63.7%, compared to GAAP gross margin of 64.9% in the fourth quarter of 2023 and 59.5% in the first quarter of 2023.
• Non-GAAP gross margin of 64.2%, compared to non-GAAP gross margin of 65.4% in the fourth quarter of 2023 and 60.3% in the first quarter of 2023.
• GAAP net income of $637.7 million, or $1.99 per diluted share, compared to GAAP net income of $436.5 million, or $1.38 per diluted share in the first quarter of 2023.
• Non-GAAP net income of $637.7 million, or $1.99 per diluted share, compared to non-GAAP net income of $452.5 million, or $1.43 per diluted share in the first quarter of 2023.

Commenting on the company's financial results, Chantelle Breithaupt, Arista’s CFO said, "We are pleased with our performance this quarter, which exceeded expectations across key financial metrics. Our commitment remains to deliver long-term value to our shareholders through sustained financial performance and strategic investments."

Stock Repurchase Programs

Arista has now completed repurchases of its common stock totaling $2 billion under previous stock repurchase programs. On May 3, 2024, Arista’s Board of Directors authorized an additional program to repurchase up to $1.2 billion. The actual timing and amount of repurchases will be dependent on market and business conditions, capital requirements, stock price, acquisition opportunities and other factors.

Company Highlights

• Arista Introduces Universal Network Observability – Arista announces CloudVisionⓇ Universal Network ObservabilityTM (CV UNOTM), a modern network observability software offering merging network infrastructure performance and data from compute and server systems-of-record to deliver keen insights into application and workload performance across data center, campus, and wide area networks.
• The New AI Era: Networking for AI and AI for Networking – Arista is delivering both optimal Networking for AI platforms and AI for networking outcomes. AI Etherlink platforms deliver high performance, low latency, fully scheduled, lossless networking as the new unit of currency for AI networks. At the same time AI for networking drives positive outcomes such as security, root cause analysis and observability through AVA.

Financial Outlook

For the second quarter of 2024, we expect:

• Revenue between $1.62 billion to $1.65 billion
• Non-GAAP gross margin of approximately 64%; and
• Non-GAAP operating margin of approximately 44%.

Guidance for non-GAAP financial measures excludes 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 because these exclusions can be uncertain or difficult to predict, including stock-based compensation expense which is impacted by 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 first 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 second 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 and the Houthi attacks on marine vessels in the Red Sea; 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; 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 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 data center/AI, campus and routing environments. Arista’s award-winning platforms deliver availability, agility, automation, analytics and security through an advanced network operating stack. For more information, visit www.arista.com.

ARISTA, CloudVision, CV UNO, AVA 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 March 31,

 

 

 

2024

 

 

2023

Revenue:

 

 

 

 

Product

 

$

1,328,845

 

$

1,172,094

Service

 

 

242,529

 

 

179,257

Total revenue

 

 

1,571,374

 

 

1,351,351

Cost of revenue:

 

 

 

 

Product

 

 

521,679

 

 

508,862

Service

 

 

48,316

 

 

37,982

Total cost of revenue

 

 

569,995

 

 

546,844

Gross profit

 

 

1,001,379

 

 

804,507

Operating expenses:

 

 

 

 

Research and development

 

 

208,395

 

 

201,408

Sales and marketing

 

 

105,080

 

 

93,492

General and administrative

 

 

27,763

 

 

25,029

Total operating expenses

 

 

341,238

 

 

319,929

Income from operations

 

 

660,141

 

 

484,578

Other income (expense), net

 

 

62,620

 

 

12,146

Income before income taxes

 

 

722,761

 

 

496,724

Provision for income taxes

 

 

85,069

 

 

60,251

Net income

 

$

637,692

 

$

436,473

Net income per share:

 

 

 

 

Basic

 

$

2.04

 

$

1.42

Diluted

 

$

1.99

 

$

1.38

Weighted-average shares used in computing net income per share:

 

 

 

 

Basic

 

 

313,032

 

 

306,985

Diluted

 

 

319,865

 

 

315,578

ARISTA NETWORKS, INC.

Reconciliation of Selected GAAP to Non-GAAP Financial Measures

(Unaudited, in thousands, except percentages and per share amounts)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

 

2023

 

GAAP gross profit

 

$

1,001,379

 

 

$

804,507

 

GAAP gross margin

 

 

63.7

%

 

 

59.5

%

Stock-based compensation expense

 

 

3,450

 

 

 

2,975

 

Intangible asset amortization

 

 

4,195

 

 

 

6,820

 

Non-GAAP gross profit

 

$

1,009,024

 

 

$

814,302

 

Non-GAAP gross margin

 

 

64.2

%

 

 

60.3

%

 

 

 

 

 

GAAP income from operations

 

$

660,141

 

 

$

484,578

 

Stock-based compensation expense

 

 

77,215

 

 

 

62,881

 

Intangible asset amortization

 

 

6,690

 

 

 

9,315

 

Non-GAAP income from operations

 

$

744,046

 

 

$

556,774

 

Non-GAAP operating margin

 

 

47.4

%

 

 

41.2

%

 

 

 

 

 

GAAP net income

 

$

637,692

 

 

$

436,473

 

Stock-based compensation expense

 

 

77,215

 

 

 

62,881

 

Intangible asset amortization

 

 

6,690

 

 

 

9,315

 

(Gains)/losses on strategic investments

 

 

—

 

 

 

5,571

 

Tax benefits on stock-based awards

 

 

(70,833

)

 

 

(50,062

)

Income tax effect on non-GAAP exclusions

 

 

(13,048

)

 

 

(11,716

)

Non-GAAP net income

 

$

637,716

 

 

$

452,462

 

 

 

 

 

 

GAAP diluted net income per share

 

$

1.99

 

 

$

1.38

 

Non-GAAP adjustments to net income

 

 

—

 

 

 

0.05

 

Non-GAAP diluted net income per share

 

$

1.99

 

 

$

1.43

 

Weighted-average shares used in computing diluted net income per share

 

 

319,865

 

 

 

315,578

 

Summary of Stock-Based Compensation Expense:

 

 

 

 

Cost of revenue

 

$

3,450

 

 

$

2,975

 

Research and development

 

 

43,788

 

 

 

36,569

 

Sales and marketing

 

 

18,901

 

 

 

15,138

 

General and administrative

 

 

11,076

 

 

 

8,199

 

Total

 

$

77,215

 

 

$

62,881

 

ARISTA NETWORKS, INC.

Condensed Consolidated Balance Sheets

(Unaudited, in thousands)

 

 

 

March 31, 2024

 

December 31, 2023

ASSETS

 

 

 

 

CURRENT ASSETS:

 

 

 

 

Cash and cash equivalents

 

$

2,092,101

 

 

$

1,938,606

 

Marketable securities

 

 

3,357,597

 

 

 

3,069,362

 

Accounts receivable

 

 

1,090,041

 

 

 

1,024,569

 

Inventories

 

 

2,025,204

 

 

 

1,945,180

 

Prepaid expenses and other current assets

 

 

361,340

 

 

 

412,518

 

Total current assets

 

 

8,926,283

 

 

 

8,390,235

 

Property and equipment, net

 

 

97,949

 

 

 

101,580

 

Acquisition-related intangible assets, net

 

 

82,078

 

 

 

88,768

 

Goodwill

 

 

268,531

 

 

 

268,531

 

Deferred tax assets

 

 

1,025,861

 

 

 

945,792

 

Other assets

 

 

149,477

 

 

 

151,900

 

TOTAL ASSETS

 

$

10,550,179

 

 

$

9,946,806

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

Accounts payable

 

$

223,305

 

 

$

435,059

 

Accrued liabilities

 

 

270,586

 

 

 

407,302

 

Deferred revenue

 

 

997,914

 

 

 

915,204

 

Other current liabilities

 

 

291,259

 

 

 

152,041

 

Total current liabilities

 

 

1,783,064

 

 

 

1,909,606

 

Income taxes payable

 

 

107,179

 

 

 

95,751

 

Deferred revenue, non-current

 

 

665,328

 

 

 

591,000

 

Other long-term liabilities

 

 

132,293

 

 

 

131,390

 

TOTAL LIABILITIES

 

 

2,687,864

 

 

 

2,727,747

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

Common stock

 

 

31

 

 

 

31

 

Additional paid-in capital

 

 

2,185,149

 

 

 

2,108,331

 

Retained earnings

 

 

5,689,064

 

 

 

5,114,025

 

Accumulated other comprehensive income (loss)

 

 

(11,929

)

 

 

(3,328

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

7,862,315

 

 

 

7,219,059

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

10,550,179

 

 

$

9,946,806

 

 

 

 

 

 

ARISTA NETWORKS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

 

2023

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

Net income

 

$

637,692

 

 

$

436,473

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation, amortization and other

 

 

15,614

 

 

 

20,905

 

Stock-based compensation

 

 

77,215

 

 

 

62,881

 

Noncash lease expense

 

 

4,580

 

 

 

4,633

 

Deferred income taxes

 

 

(77,822

)

 

 

(71,153

)

Loss on strategic investments

 

 

—

 

 

 

5,571

 

Amortization (accretion) of investment premiums (discounts)

 

 

(12,418

)

 

 

(4,220

)

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable, net

 

 

(65,472

)

 

 

60,221

 

Inventories

 

 

(80,024

)

 

 

(392,997

)

Other assets

 

 

38,082

 

 

 

(55,917

)

Accounts payable

 

 

(207,234

)

 

 

94,564

 

Accrued liabilities

 

 

(136,554

)

 

 

58,655

 

Deferred revenue

 

 

157,038

 

 

 

51,028

 

Income taxes, net

 

 

157,537

 

 

 

108,200

 

Other liabilities

 

 

5,571

 

 

 

(4,361

)

Net cash provided by operating activities

 

 

513,805

 

 

 

374,483

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

Proceeds from maturities of marketable securities

 

 

590,436

 

 

 

824,021

 

Proceeds from sale of marketable securities

 

 

36,750

 

 

 

21,725

 

Purchases of marketable securities

 

 

(912,441

)

 

 

(861,612

)

Purchases of property and equipment

 

 

(9,395

)

 

 

(5,631

)

Investments in notes and privately-held companies

 

 

(1,000

)

 

 

(250

)

Net cash used in investing activities

 

 

(295,650

)

 

 

(21,747

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

Proceeds from issuance of common stock under equity plans

 

 

25,144

 

 

 

23,096

 

Tax withholding paid on behalf of employees for net share settlement

 

 

(25,541

)

 

 

(9,224

)

Repurchases of common stock

 

 

(62,653

)

 

 

(82,275

)

Net cash used in financing activities

 

 

(63,050

)

 

 

(68,403

)

Effect of exchange rate changes

 

 

(1,608

)

 

 

314

 

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

153,497

 

 

 

284,647

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH —Beginning of period

 

 

1,939,464

 

 

 

675,978

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH —End of period

 

$

2,092,961

 

 

$

960,625

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240507732052/en/

Investor Contacts:

Arista Networks, Inc. Liz Stine, 408-547-5885 Investor Relations liz@arista.com