01—Abstract
Summary
Summary of the 10-K filed February 20, 2018. Cited figures are marked; the original filing is the authoritative source.
Arista Networks, Inc. (ANET) demonstrated robust revenue growth of 45.8% in 2017, reaching $1.65 billiona, driven primarily by increased product shipments to existing customers and the market acceptance of its newer switch products.
The company maintains strong gross margins around 64%, indicating effective cost management and competitive pricing. Despite significant investments in research and development, which increased by 27.8% year-over-year, Arista Networks achieved a healthy net income of $423.2 millionb, a substantial increase from $184.2 million in 2016. The company's proprietary Extensible Operating System (EOS) remains a key differentiator, enabling programmability, automation, and integration capabilities crucial for cloud networking.
Arista Networks continues to expand its customer base and geographic reach, with a particular strength in large Internet companies and cloud service providers. While facing intense competition and ongoing litigation with Cisco Systems, the company appears to be navigating these challenges effectively through product redesigns and strategic management of legal matters.
02—Key points
Key Highlights
- Revenue growth of 45.8% year-over-year to $1.65 billion in 2017, demonstrating strong market demand.
- Net income increased significantly to $423.2 million in 2017, up from $184.2 million in 2016, reflecting improved profitability.
- Gross margin remained strong at 64.5% in 2017, indicating efficient operations and pricing power.
- Continued significant investment in R&D (21.2% of revenue) to maintain technological leadership in cloud networking.
- Expansion of customer base to over 4,900 end customers worldwide, including major cloud service providers.
- Positive cash flow from operations of $631.6 million in 2017, underscoring financial health.
- Ongoing litigation with Cisco Systems continues to be a material factor, with Arista actively managing design changes and legal defenses.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Arista Networks, Inc. kept $0.26.
- Revenue$1.65B100.0%
- Cost of revenue−$584.4M35.5%
- Gross profit$1.06B64.5%
- Operating costs−$591.5M35.9%
- Operating income$470.3M28.6%
- Interest, other & tax−$47.1M2.9%
- Net income$423.2M25.7%
Where FY2017 revenue went
$1.65B- Cost of revenue: $584.4M, 36% of revenue
- Net income: $423.2M, 26% of revenue
- R&D: $349.6M, 21% of revenue
- Other operating costs: $241.9M, 15% of revenue
- Interest, other & tax: $47.1M, 2.9% of revenue
Kept 26% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 20, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $1.65B$1.13B | +45.8% |
| Cost of Revenue | $584.42M$406.05M | +43.9% |
| Gross Profit | $1.06B$723.12M | +46.8% |
| R&D Expenses | $349.59M$273.58M | +27.8% |
| Operating Expenses | $591.50M$479.71M | +23.3% |
| Operating Income | $470.27M$243.41M | +93.2% |
| Interest Expense | $2.78M$3.14M | −11.4% |
| Net Income | $423.20M$184.19M | +129.8% |
| EPS (Basic) | $0.37$0.17 | +119.9% |
| EPS (Diluted) | $0.33$0.16 | +114.0% |
| Shares Outstanding (Basic) | 1.16B1.10B | +5.1% |
| Shares Outstanding (Diluted) | 1.26B1.17B | +7.9% |
05—Questions
Frequently Asked Questions
What is Arista Networks' core business and competitive advantage?
Arista Networks specializes in cloud networking solutions, offering Ethernet switching and routing platforms powered by its proprietary Extensible Operating System (EOS). EOS is a key differentiator due to its programmability, modularity, and automation capabilities, which are highly valued by large Internet companies and cloud service providers seeking scalable and efficient network infrastructure.
How is Arista Networks performing financially based on this filing?
The company demonstrated strong financial performance in 2017, with revenue growing by 45.8% to $1.65 billion and net income nearly doubling to $423.2 million. Gross margins remained robust at 64.5%, and the company generated significant positive cash flow from operations, indicating healthy business momentum.
What are the major risks or challenges facing Arista Networks as highlighted in the filing?
The primary risks highlighted include intense competition from established players like Cisco Systems, ongoing litigation with Cisco over patent and copyright infringement which has required product redesigns and ongoing legal defense, reliance on key component suppliers, and the inherent risks of operating in a rapidly evolving technology market. Additionally, managing rapid growth and potential supply chain disruptions are key considerations.
What is the company's strategy for future growth?
Arista Networks plans to continue its growth by focusing on its core cloud networking solutions, investing heavily in R&D to enhance its EOS platform and develop new products, expanding its sales and marketing efforts globally, and deepening relationships with existing customers and channel partners. The company aims to capitalize on the ongoing shift towards cloud computing and next-generation data centers.
06—Continue