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Arista (ANET) Surpasses Q2 Earnings & Revenue Estimates

Arista Networks Inc.ANET reported strong second-quarter 2018 results with healthy year-over-year increase in earnings and revenues on the back of solid order trends and favorable growth dynamics.

Quarter Details

GAAP earnings improved to $150.7 million or $1.86 per share from $102.7 million or $1.30 per share in the year-earlier quarter, largely due to top-line growth and record profitability.

Non-GAAP earnings for the reported quarter were $155.7 million or $1.93 per share compared with $105.5 million or $1.34 per share in the year-ago quarter. The bottom line comfortably surpassed the Zacks Consensus Estimate of $1.72.

Arista Networks, Inc. Price, Consensus and EPS Surprise

Arista Networks, Inc. Price, Consensus and EPS Surprise | Arista Networks, Inc. Quote

Revenues of $519.8 million increased 28.3% year over year and outpaced the Zacks Consensus Estimate of $508 million with continued strength from the Cloud Titans vertical. Further, revenues came ahead of management's guidance of $500 million. Product revenues improved to $444.8 million from $353.9 million, while Service revenues rose to $75.1 million from $51.3 million.

Arista is benefiting from strong demand of the 'Cloud Titans' vertical, which was the top revenue contributor for the quarter followed by 'Enterprises' and 'Cloud Specialized Providers'.

Non-GAAP gross margin expanded 10 basis points (bps) to 64.5% and was above the mid-point of management's guidance of 62-64%, primarily driven by strong revenues and favorable customer mix. Non-GAAP operating margin jumped to 36.8% from 36.3% in the prior-year period.

Balance Sheet & Cash Flow

Cash & cash equivalents as of Jun 30, 2018, were $711.2 million. Inventory declined to $245.4 million in the quarter from $268.1 million in the previous quarter due to reduction in finished goods, reflecting optimization of supply chain. Deferred revenue balance was $448.6 million, down from $456.1 million in the previous quarter.

For the first six months of 2018, cash flow from operating activities aggregated $326.1 million compared with $242.1 million in the year-ago period.

Guidance

For third-quarter 2018, Arista projects revenues in the range of $540-$552 million. The company anticipates non-GAAP gross margin of 63-65% and operating margin of approximately 32-34%.

Zacks Rank & Stocks to Consider

Arista currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry are Clearfield, Inc. CLFD and Qualcomm Inc. QCOM , both carrying a Zacks Rank #2 (Buy), and Comtech Telecommunications Corp. CMTL sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Clearfield has a positive earnings surprise history with an average of 52.8% in the trailing four quarters, beating estimates in each.

Qualcomm has long-term earnings growth expectations of 10.9%. It has a positive earnings surprise history with an average of 19.8% in the trailing four quarters, beating estimates in each.

Comtech Telecommunications has long-term earnings growth expectations of 5%. It has a positive earnings surprise history with an average of 123.7% in the trailing four quarters, beating estimates in each.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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