01—Abstract
Summary
Summary of the 10-K filed February 17, 2017. Cited figures are marked; the original filing is the authoritative source.
Arista Networks, Inc. (ANET) in its 2016 Form 10-K filed on February 17, 2017, reported strong revenue growth, reaching $1.1 billiona 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 millionb.
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.
02—Key points
Key Highlights
- Arista Networks reported a substantial revenue increase of 34.8% year-over-year, reaching $1.1 billion for the fiscal year 2016.
- Net income grew to $184.2 million, reflecting strong profitability from its cloud networking solutions.
- The company achieved significant market share in data center 10/25/40/50/100 Gigabit Ethernet switch ports, ranking second excluding blade switching.
- Arista 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.
- The company's proprietary Extensible Operating System (EOS) is a core competitive advantage, enabling programmability, automation, and rapid feature development.
- Arista's customer base has expanded significantly, growing from approximately 1,100 in 2011 to over 4,200 by the end of 2016.
- The company faces ongoing litigation with Cisco Systems, Inc. regarding intellectual property infringement, which presents a significant risk factor.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Arista Networks, Inc. kept $0.16.
- Revenue$1.13B100.0%
- Cost of revenue−$406.1M36.0%
- Gross profit$723.1M64.0%
- Operating costs−$479.7M42.5%
- Operating income$243.4M21.6%
- Interest, other & tax−$59.2M5.2%
- Net income$184.2M16.3%
Where FY2016 revenue went
$1.13B- Cost of revenue: $406.1M, 36% of revenue
- R&D: $273.6M, 24% of revenue
- Other operating costs: $206.1M, 18% of revenue
- Net income: $184.2M, 16% of revenue
- Interest, other & tax: $59.2M, 5.2% of revenue
Kept 16% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 17, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $1.13B$837.59M | +34.8% |
| Cost of Revenue | $406.05M$294.03M | +38.1% |
| Gross Profit | $723.12M$543.56M | +33.0% |
| R&D Expenses | $273.58M$209.45M | +30.6% |
| Operating Expenses | $479.71M$394.25M | +21.7% |
| Operating Income | $243.41M$149.31M | +63.0% |
| Interest Expense | $3.14M— | — |
| Net Income | $184.19M$121.10M | +52.1% |
| EPS (Basic) | $0.17$0.11 | +47.0% |
| EPS (Diluted) | $0.16$0.10 | +49.7% |
| Shares Outstanding (Basic) | 1.10B1.06B | +4.3% |
| Shares Outstanding (Diluted) | 1.17B1.14B | +2.5% |
05—Questions
Frequently Asked Questions
What is Arista Networks' primary business and market focus?
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.
How did Arista Networks perform financially in 2016?
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.
What are the key competitive advantages highlighted by Arista Networks?
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.
What are the major risks or challenges faced by Arista Networks as disclosed in the filing?
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.
06—Continue