Arista Networks Inc (ANET) Q3 2024 Earnings Call Highlights: Record Revenue and Strategic AI ...

GuruFocus News
5 min read

In This Article:

  • Revenue: $1.81 billion, a 20% year-over-year increase.

  • Non-GAAP Earnings Per Share (EPS): $2.40, a 31.1% increase from the prior year.

  • Non-GAAP Gross Margin: 64.6%, above the guidance range.

  • Operating Income: $890.1 million, representing 49.1% of revenue.

  • Net Income: $769.1 million.

  • Cash, Cash Equivalents, and Investments: Approximately $7.4 billion.

  • Cash from Operations: Approximately $1.2 billion.

  • Deferred Revenue: $2.5 billion, up from $2.1 billion in Q2.

  • R&D Spending: $177.5 million, or 9.8% of revenue.

  • Operating Expenses: $279.9 million, or 15.5% of revenue.

  • Stock Repurchase: $65.2 million of common stock repurchased.

  • Guidance for Q4 2024 Revenue: $1.85 billion to $1.9 billion.

  • Guidance for Q4 2024 Gross Margin: Approximately 63% to 64%.

  • Guidance for Q4 2024 Operating Margin: Approximately 44%.

  • 2025 Revenue Growth Projection: 15% to 17%, aiming for approximately $8 billion in revenue.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Arista Networks Inc (NYSE:ANET) reported a strong Q3 2024 with revenues of $1.81 billion, marking a 20% year-over-year increase.

  • The company achieved a record non-GAAP earnings per share of $2.40, exceeding expectations.

  • Arista Networks Inc (NYSE:ANET) is well-positioned in the AI networking space, with significant traction in AI pilots and plans to expand its AI center networking to $1.5 billion by 2025.

  • The company's gross margin improved to 64.6%, driven by stronger enterprise margins and supply chain discipline.

  • Arista Networks Inc (NYSE:ANET) announced a 4-for-1 stock split, aiming to make its stock more accessible to a wider range of investors.

Negative Points

  • The company faces extended lead times for advanced semiconductors, impacting supply chain predictability.

  • One of the five major AI customers is progressing slower than expected, potentially affecting future growth.

  • Arista Networks Inc (NYSE:ANET) anticipates a decrease in gross margin to 60%-62% in 2025 due to customer mix changes.

  • The company is experiencing increased working capital requirements, primarily driven by inventory needs for AI network deployments.

  • Despite strong growth, Arista Networks Inc (NYSE:ANET) expects revenue growth to decelerate to 15%-17% in 2025, compared to previous years.

Q & A Highlights

Q: Can you explain the expected slowdown in non-AI and non-campus business growth for next year? A: Our visibility extends only about six months, so we are cautious in our projections. While our cloud customers are pivoting aggressively towards AI, we anticipate faster growth in AI and campus markets, with slower growth in traditional data center and cloud markets. This reflects our current visibility across customer segments and product sectors. - Jayshree Ullal, CEO

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