10-KPeriod: FY2016

Arista Networks, Inc. Annual Report, Year Ended Dec 31, 2016

Filed February 17, 2017For Securities:ANET

Summary

Arista Networks, Inc. (ANET) in its 2016 Form 10-K filed on February 17, 2017, reported strong revenue growth, reaching $1.1 billion for the year ended December 31, 2016, a 34.8% increase from the prior year. The company has successfully positioned itself as a leader in cloud networking solutions, driven by its Extensible Operating System (EOS) and its focus on large-scale Internet companies and cloud service providers. Arista's profitability has also shown a steady increase, with net income reaching $184.2 million. The company highlights its purpose-built cloud networking platform, a broad and differentiated product portfolio, and its proprietary single-binary image EOS software as key competitive strengths. Despite significant investments in research and development, Arista demonstrates solid financial health and a clear strategy for continued expansion in the rapidly growing cloud networking market.

Financial Highlights

51 data points
Beta

Revenue

$1.13B

64.0% Gross Margin

Net Income

$184.19M

16.3% Net Margin

EPS (Diluted)

$0.16

Total Assets

$1.73B

Cash & Equivalents

$567.92M

Free Cash Flow

$152.88M

Financial Statements
Beta
Revenue$1.13B
Cost of Revenue$406.05M
Gross Profit$723.12M
R&D Expenses$273.58M
Operating Expenses$479.71M
Operating Income$243.41M
Interest Expense$3.14M
Net Income$184.19M
EPS (Basic)$0.17
EPS (Diluted)$0.16
Shares Outstanding (Basic)1.10B
Shares Outstanding (Diluted)1.17B

Key Highlights

  • 1Arista Networks reported a substantial revenue increase of 34.8% year-over-year, reaching $1.1 billion for the fiscal year 2016.
  • 2Net income grew to $184.2 million, reflecting strong profitability from its cloud networking solutions.
  • 3The company achieved significant market share in data center 10/25/40/50/100 Gigabit Ethernet switch ports, ranking second excluding blade switching.
  • 4Arista continues to heavily invest in Research and Development, with R&D expenses at $273.6 million, or approximately 24.2% of revenue, to drive innovation and maintain its technology leadership.
  • 5The company's proprietary Extensible Operating System (EOS) is a core competitive advantage, enabling programmability, automation, and rapid feature development.
  • 6Arista's customer base has expanded significantly, growing from approximately 1,100 in 2011 to over 4,200 by the end of 2016.
  • 7The company faces ongoing litigation with Cisco Systems, Inc. regarding intellectual property infringement, which presents a significant risk factor.

Frequently Asked Questions

Arista Networks is a leading supplier of cloud networking solutions, focusing on providing high-performance, scalable, and programmable Ethernet switching and routing platforms powered by its Extensible Operating System (EOS). Its primary market consists of large-scale Internet companies, cloud service providers, and next-generation data centers for enterprise support.

For the fiscal year ended December 31, 2016, Arista Networks reported strong financial performance with revenue reaching $1.1 billion, representing a 34.8% increase compared to 2015. Net income was $184.2 million. The company maintained healthy gross margins and continued to invest significantly in R&D and sales and marketing to support its growth.

Arista's key competitive advantages include its purpose-built cloud networking platform designed for scale and programmability, its broad and differentiated product portfolio, and its proprietary single binary image EOS software which ensures feature consistency and enables rapid innovation. The company also emphasizes its deep understanding of customer requirements and its experienced management and engineering team.

Arista Networks faces several key risks. A significant challenge is the ongoing intellectual property litigation with Cisco Systems, which could result in substantial damages, injunctions, or requirements to modify products. Other risks include intense competition, reliance on a few large customers for a substantial portion of revenue, potential supply chain disruptions, and the need to continually innovate and adapt to rapid technological shifts in the cloud networking market.