Arista Networks Inc (NYSE: ANET) reported better than anticipated fiscal 2023 second quarter results as both product and service revenues surged from a similar quarter of fiscal 2022. The cloud networking solutions provider also issued a better-than-anticipated Q3 revenue outlook. Following the impressive results, the stock surged 19.68%, or $30.52, to close at $185.61.
Santa Clara, California-based Arista Networks reported second-quarter revenue of $1.46 billion, up 39% from $1.05 billion in the second quarter of fiscal 2022.
For the June 2023 quarter, the computer networking company recorded a net income of $491.9 million, or $1.55 per share. In the June 2022 quarter, Arista posted a net income of $299.1 million, or $0.94 per share.
Excluding stock-based compensation expense, intangible asset amortization, unrealized loss (gain) on equity investments, tax benefit on stock-based awards, and income tax effect on non-GAAP exclusions, among others, the Q2 2023 non-GAAP net income was $501.20 million, or $1.58 per share, an increase from $342.68 million, or $1.08 per share, in Q2 2022.
Analysts surveyed by Refinitiv had anticipated the company to report earnings of $1.44 per share on revenues of $1.38 billion.
Commenting on the recent quarter’s performance, Ita Brennan, Arista’s CFO, stated, “In spite of the return to shorter lead times and reduced visibility, we are executing well with gradual incremental improvements to our 2023 outlook which now calls for year-over-year growth in excess of 30%.”
Segment wise:
- Product revenues surged 42.40% y-o-y to $1.26 billion.
- Service revenues were $197.40 million, up 18.80% from last year.
The company also reported a 2Q 2023 non-GAAP gross margin of 61.30%, compared with 60.30% in 2Q 2022. During the first quarter, Arista shipped 75 million cloud networking ports (cumulative).
Looking forward, Arista forecasts third-quarter revenues in the range of $1.45 billion to $1.50 billion. The company also expects a non-GAAP gross margin and a non-GAAP operating margin of about 62% and 41%, respectively. Analysts surveyed by Refinitiv anticipate Arista to post Q3 revenues of $1.39 billion.
The Q3 projection highlights strong demand from clients such as Microsoft and Meta as they acquire Arista’s newest 7800 series switches, tailored to accommodate artificial intelligence (AI) applications.
The quarterly beat and robust Q3 revenue outlook are expected to keep the stock of Arista bullish in the short term.
The historical price chart indicates that the stock of Arista has broken above the nearly three-month resistance level of 175. The stock is now trading in uncharted territory. Additionally, the Chaikin Money Flow indicator is showing a positive reading. Therefore, we anticipate the stock price of Arista to remain in an uptrend in the short term.
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