Arista Networks, Inc. (NYSE: ANET), an industry leader in
data-driven, client to cloud networking for large data center,
campus and routing environments, today announced financial results
for its fourth quarter and the full year ended December 31,
2023.
"I am truly honored to be a part of the leadership team that
will drive Arista 2.0 products and technology for enterprise, cloud
and AI customers," said incoming CFO Chantelle Breithaupt. "As we
enter 2024, we remain focused on satisfying their most demanding
requirements with our compelling, innovative networking
solutions."
Full Year Financial Results
- Revenue of $5,860.2 million, an increase of 33.8% compared to
fiscal year 2022.
- GAAP gross margin of 61.9%, compared to GAAP gross margin of
61.1% in fiscal year 2022.
- Non-GAAP gross margin of 62.6%, compared to non-GAAP gross
margin of 61.9% in fiscal year 2022.
- GAAP net income of $2,087.3 million, or $6.58 per diluted
share, compared to GAAP net income of $1,352.4 million, or $4.27
per diluted share, in fiscal year 2022.
- Non-GAAP net income of $2,199.4 million or $6.94 per diluted
share, compared to non-GAAP net income of $1,448.3 million or $4.58
per diluted share, in fiscal year 2022.
Fourth Quarter Financial Results
- Revenue of $1,540.4 million, an increase of 2.1% compared to
the third quarter of 2023, and an increase of 20.8% from the fourth
quarter of 2022.
- GAAP gross margin of 64.9%, compared to GAAP gross margin of
62.4% in the third quarter of 2023 and 60.3% in the fourth quarter
of 2022.
- Non-GAAP gross margin of 65.4%, compared to non-GAAP gross
margin of 63.1% in the third quarter of 2023 and 61.0% in the
fourth quarter of 2022.
- GAAP net income of $613.6 million, or $1.92 per diluted share,
compared to GAAP net income of $427.1 million, or $1.35 per diluted
share, in the fourth quarter of 2022.
- Non-GAAP net income of $664.3 million, or $2.08 per diluted
share, compared to non-GAAP net income of $445.1 million, or $1.41
per diluted share, in the fourth quarter of 2022.
Commenting on the company's financial results, Ita Brennan,
Arista’s outgoing CFO said, “Our outstanding performance for 2023
epitomizes our focus on profitable revenue growth, expanding our
enterprise and campus footprint while leveraging R&D and
go-to-market investments across the business."
Fourth Quarter Company Highlights
- Arista 7130 Series Leads the Way to 25G Ultra-Low Latency
Networking – announcing the next generation 7130 Series for
ultra-low latency switching that accelerates 25G networking. With
three new 25G optimized systems, enhanced performance optics, 25G
ready FPGA applications and updates to the FDK (FPGA Development
Kit), Arista is addressing the needs for 25G market data
distribution and High-Frequency Trading (HFT) environments.
- Arista Networks Unveils Zero Trust Networking Vision –
announcing an expanded zero trust networking architecture that uses
the underlying network infrastructure to break down security silos,
streamline workflows and enable an integrated zero trust program.
Through a combination of Arista-developed technologies and
strategic alliances with key partners, this approach uses the
network to compensate for harder-to-implement zero trust controls
across the domains of devices, workloads, identity, and data.
- Arista Networks Appoints New CFO – announcing the appointment
of Chantelle Breithaupt as the company’s CFO, effective February
2024.
Full Year Company Highlights
- The Arrival of Open AI Networking – Arista and the founding
members of the Ultra Ethernet Consortium (UEC) have set out on the
mission to enhance the capabilities of Ethernet for AI and
HPC.
- Arista Networks Introduces AI-Driven Network Identity – Arista
introduced a cloud-delivered, AI-driven network identity service
for enterprise security and IT operations.
- In the first half of 2023, Arista surpassed 75 million cloud
network ports shipped cumulatively.
- Arista Named a Leader in The Forrester Wave™: Network Analysis
and Visibility, Q2 2023 which notes that “Arista Networks’
deployment flexibility is second to none.”
- Arista Modernizes Routing in the Wide Area Network - Arista
introduced the Arista WAN Routing System, which combines three new
networking offerings: enterprise-class routing platforms,
carrier/cloud-neutral internet transit capabilities, and the
CloudVision® Pathfinder Service to simplify and improve customer
wide area networks.
- Arista Showcases Next Generation Systems and Optics for Cloud,
Internet Service Provider, and Enterprise Networks - Arista
announced its range of products and solutions, along with
perspectives on the petascale era of cloud networking and the
systems and optics required to meet the demands of new AI/ML-driven
network architectures.
Financial Outlook
For the first quarter of 2024, we expect:
- Revenue between $1.52 billion to $1.56 billion;
- Non-GAAP gross margin of approximately 62%; and
- Non-GAAP operating margin of approximately 42%.
Guidance for non-GAAP financial measures excludes stock-based
compensation expense, amortization of acquisition-related
intangible assets, and other acquisition-related costs. 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 fourth quarter and year end
2023 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 first 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 rapid 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 and other acquisition-related
expenses, gains/losses on strategic investments, an intellectual
property dispute settlement, 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, 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
https://www.arista.com.
ARISTA, EOS, CloudVision, NetDL and AVA 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. Additional
information and resources can be found at www.arista.com.
ARISTA NETWORKS, INC.
Condensed Consolidated
Statements of Operations
(Unaudited, in thousands,
except per share amounts)
Three Months Ended December
31,
Twelve Months Ended December
31,
2023
2022
2023
2022
Revenue:
Product
$
1,310,314
$
1,096,866
$
5,029,493
$
3,716,079
Service
230,123
178,686
830,675
665,231
Total revenue
1,540,437
1,275,552
5,860,168
4,381,310
Cost of revenue:
Product
495,826
471,617
2,061,167
1,573,629
Service
45,385
35,329
168,720
131,985
Total cost of revenue
541,211
506,946
2,229,887
1,705,614
Total gross profit
999,226
768,606
3,630,281
2,675,696
Operating expenses:
Research and development
211,481
190,423
854,918
728,394
Sales and marketing
105,538
85,443
399,034
326,955
General and administrative
42,293
23,821
119,080
93,241
Total operating expenses
359,312
299,687
1,373,032
1,148,590
Income from operations
639,914
468,919
2,257,249
1,527,106
Other income, net
54,477
16,926
164,777
54,690
Income before income taxes
694,391
485,845
2,422,026
1,581,796
Provision for income taxes
80,755
58,756
334,705
229,350
Net income
$
613,636
$
427,089
$
2,087,321
$
1,352,446
Earnings per share:
Basic
$
1.97
$
1.39
$
6.75
$
4.41
Diluted
$
1.92
$
1.35
$
6.58
$
4.27
Weighted-average common shares
outstanding:
Basic
311,612
306,162
309,354
306,473
Diluted
318,845
315,201
317,135
316,459
ARISTA NETWORKS, INC.
Reconciliation of Selected
GAAP to Non-GAAP Financial Measures
(Unaudited, in thousands,
except percentages and per share amounts)
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2023
2022
2023
2022
GAAP gross profit
$
999,226
$
768,606
$
3,630,281
$
2,675,696
GAAP gross margin
64.9
%
60.3
%
61.9
%
61.1
%
Stock-based compensation expense
3,273
3,075
12,789
9,688
Intangible asset amortization
4,195
6,821
23,457
25,374
Non-GAAP gross profit
$
1,006,694
$
778,502
$
3,666,527
$
2,710,758
Non-GAAP gross margin
65.4
%
61.0
%
62.6
%
61.9
%
GAAP income from operations
$
639,914
$
468,919
$
2,257,249
$
1,527,106
Stock-based compensation expense
81,358
64,954
296,756
230,934
Intangible asset amortization
6,690
9,316
33,437
33,650
Acquisition-related costs(1)
—
—
—
4,691
Legal settlement (2)
16,000
—
16,000
—
Non-GAAP income from operations
$
743,962
$
543,189
$
2,603,442
$
1,796,381
Non-GAAP operating margin
48.3
%
42.6
%
44.4
%
41.0
%
GAAP net income
$
613,636
$
427,089
$
2,087,321
$
1,352,446
Stock-based compensation expense
81,358
64,954
296,756
230,934
Intangible asset amortization
6,690
9,316
33,437
33,650
Acquisition-related costs(1)
—
—
—
4,691
Gain on strategic investments
—
(3,358
)
(18,699
)
(27,479
)
Tax benefit on stock-based awards
(40,561
)
(37,177
)
(174,122
)
(113,502
)
Income tax effect on non-GAAP
exclusions
(12,795
)
(15,677
)
(41,283
)
(32,482
)
Legal settlement (2)
16,000
—
16,000
—
Non-GAAP net income
$
664,328
$
445,147
$
2,199,410
$
1,448,258
GAAP diluted net income per share
$
1.92
$
1.35
$
6.58
$
4.27
Non-GAAP adjustments to net income
0.16
0.06
0.36
0.31
Non-GAAP diluted net income per share
$
2.08
$
1.41
$
6.94
$
4.58
Weighted-average shares used in computing
diluted net income per share
318,845
315,201
317,135
316,459
Summary of Stock-Based Compensation
Expense:
Cost of revenue
$
3,273
$
3,075
$
12,789
$
9,688
Research and development
46,506
37,174
172,177
130,897
Sales and marketing
19,613
15,532
71,074
57,571
General and administrative
11,966
9,173
40,716
32,778
Total
$
81,358
$
64,954
$
296,756
$
230,934
___________________
(1) Represents costs associated with
business combinations, which primarily include retention bonuses,
and professional and consulting fees. (2) In the quarter ended
December 31, 2023, we agreed to pay $16 million to settle an
intellectual property dispute and we recorded this amount to
general and administrative expenses.
ARISTA NETWORKS, INC.
Condensed Consolidated Balance
Sheets
(Unaudited, in
thousands)
December 31, 2023
December 31, 2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
1,938,606
$
671,707
Marketable securities
3,069,362
2,352,022
Accounts receivable
1,024,569
923,096
Inventories
1,945,180
1,289,706
Prepaid expenses and other current
assets
412,518
314,217
Total current assets
8,390,235
5,550,748
Property and equipment, net
101,580
95,009
Acquisition-related intangible assets,
net
88,768
122,205
Goodwill
268,531
265,924
Deferred tax assets
945,792
574,912
Other assets
151,900
166,612
TOTAL ASSETS
$
9,946,806
$
6,775,410
LIABILITIES AND STOCKHOLDERS’
EQUITY
CURRENT LIABILITIES:
Accounts payable
$
435,059
$
232,572
Accrued liabilities
407,302
292,487
Deferred revenue
915,204
637,432
Other current liabilities
152,041
131,040
Total current liabilities
1,909,606
1,293,531
Income taxes payable
95,751
89,839
Deferred revenue, non-current
591,000
403,814
Other long-term liabilities
131,390
102,406
TOTAL LIABILITIES
2,727,747
1,889,590
STOCKHOLDERS’ EQUITY:
Common stock
31
31
Additional paid-in capital
2,108,331
1,780,714
Retained earnings
5,114,025
3,138,983
Accumulated other comprehensive income
(loss)
(3,328
)
(33,908
)
TOTAL STOCKHOLDERS’ EQUITY
7,219,059
4,885,820
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY
$
9,946,806
$
6,775,410
ARISTA NETWORKS, INC.
Condensed Consolidated
Statements of Cash Flows
(Unaudited, in
thousands)
Twelve Months Ended December
31,
2023
2022
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income
$
2,087,321
$
1,352,446
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, amortization and other
70,630
62,700
Noncash lease expense
18,236
18,648
Stock-based compensation
296,756
230,934
Deferred income taxes
(370,796
)
(244,382
)
Gain on strategic investments
(18,699
)
(27,479
)
Amortization of investment premiums
(33,518
)
12,767
Changes in operating assets and
liabilities:
Accounts receivable, net
(101,473
)
(401,531
)
Inventories
(655,474
)
(638,948
)
Other assets
(66,401
)
(117,465
)
Accounts payable
198,612
31,436
Other liabilities
123,694
70,704
Deferred revenue
464,958
98,957
Income taxes, net
20,168
44,026
Net cash provided by operating
activities
2,034,014
492,813
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from maturities of marketable
securities
1,887,939
1,643,824
Proceeds from sale of marketable
securities
67,284
193,782
Purchases of marketable securities
(2,606,878
)
(1,418,857
)
Purchases of property, equipment and
intangible assets
(34,434
)
(44,644
)
Cash paid for business combination, net of
cash acquired
1,799
(145,087
)
Investment in notes and privately-held
companies
(3,164
)
(12,691
)
Net cash provided by (used in) investing
activities
(687,454
)
216,327
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of common stock
under equity plans
62,093
48,411
Tax withholding paid on behalf of
employees for net share settlement
(33,563
)
(32,725
)
Repurchase of common stock
(112,279
)
(670,287
)
Net cash used in financing activities
(83,749
)
(654,601
)
Effect of exchange rate changes
675
(3,611
)
NET INCREASE/(DECREASE) IN CASH, CASH
EQUIVALENTS AND RESTRICTED CASH
1,263,486
50,928
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
—Beginning of period
675,978
625,050
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
—End of period
$
1,939,464
$
675,978
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240212689233/en/
Investor Contacts: Arista Networks, Inc. Liz Stine, 408-547-5885
Director, Investor Relations liz@arista.com
Arista Networks (NYSE:ANET)
Historical Stock Chart
From Apr 2024 to May 2024
Arista Networks (NYSE:ANET)
Historical Stock Chart
From May 2023 to May 2024