Arista Networks, Inc. ANET reported strong third-quarter 2024 results, with revenues and adjusted earnings soaring year over year, driven by robust demand trends. Innovative product launches and steady customer additions backed by the company’s best-in-class portfolio strength led to top-line expansion, while steady margin improvement contributed to earnings growth. Both the bottom and the top lines beat the Zacks Consensus Estimate.
ANET Rides on Portfolio Traction
Driven by improved market demand on the back of a flexible business model and solid cash flow, Arista continues to benefit from strong momentum and diversification across its top verticals and product lines. As more business enterprises transition to the cloud, the company is well-poised for growth in data-driven cloud networking business with proactive platforms and predictive operations.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed data center segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products. In addition, the company offers one of the broadest product lines of data center and campus Ethernet switches and routers in the industry. It provides routing and switching platforms with industry-leading capacity, low latency, port density and power efficiency. The company also innovates in areas such as deep packet buffers, embedded optics and reversible cooling.
Arista is witnessing solid demand trends among enterprise customers backed by its multi-domain modern software approach, which is built upon its unique and differentiating foundation, the single EOS (Extensible Operating System) and CloudVision stack. The versatility of Arista’s unified software stack across various use cases, including WAN routing and campus and data center infrastructure, has helped it to record steady top-line growth over the years.
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ANET Focusing on Cognitive Wi-Fi Software, Cloud
Arista is also benefiting from the expanding cloud networking market driven by the strong demand for scalable infrastructure. In addition to high capacity and easy availability, its cloud networking solutions promise predictable performance and programmability, enabling integration with third-party applications for network management, automation and orchestration.
With customers deploying transformative cloud networking solutions, the company has announced several additions to its multi-cloud and cloud-native software product family with CloudEOS Edge. It has introduced cognitive Wi-Fi software that delivers intelligent application identification, automated troubleshooting and location services.
ANET Offers Healthy Outlook
Arista expects healthy demand trends for the remainder of 2024, backed by the strength of its portfolio and new product introductions. The company expects solid traction from Etherlink AI platforms that are ultra-Ethernet consortium compatible, validating the migration from InfiniBand to Ethernet.
For the fourth quarter of 2024, management expects revenues in the range of $1.85-$1.9 billion, owing to a robust growth momentum. Non-GAAP gross margin is estimated in the range of 63-64%, and non-GAAP operating margin is approximated at 44%. For 2025, management expects revenues to improve 15-17% year over year, with a gross margin of 60-62% and an operating margin of 43-44%.
Price Performance
Buoyed by a holistic growth model, Arista has surged 88.1% over the past year compared with the industry’s growth of 82.3%. It has also outperformed its peers like Juniper Networks, Inc. JNPR and Cisco Systems, Inc. CSCO over this period.
One-Year Price Performance
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Estimate Revision Trend
Earnings estimates for Arista for 2024 have moved up 6 cents to $8.34 over the past seven days, while the same for 2025 has increased a penny to $9.37. The positive estimate revision depicts optimism about the stock’s growth potential.
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End Note
With solid fundamentals and healthy revenue-generating potential driven by robust demand trends, Arista appears to be a solid investment proposition. Further, a strong emphasis on quality, diligent execution of operational plans and continuous portfolio enhancements are driving more value for customers. Steady improvement in lead times and easing of supply chain woes are major tailwinds.
The stock delivered a trailing four-quarter average earnings surprise of 14.8%. Arista currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Riding on a robust earnings surprise history and favorable Zacks Rank, it appears primed for further stock price appreciation. Consequently, investors are likely to profit if they bet on this high-flying stock.
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