01—Abstract
Summary
Summary of the 10-K filed February 19, 2021. Cited figures are marked; the original filing is the authoritative source.
Arista Networks, Inc. (ANET) reported revenues of $2.32 billiona for the fiscal year ended December 30, 2020, a slight decrease of 3.9% from the prior year.
This decline was primarily attributed to reduced sales to major customers and some COVID-19 related supply chain constraints, partially offset by growth in service revenue. The company strategically expanded its portfolio through acquisitions of Big Switch Networks and Awake Security, enhancing its capabilities in network monitoring and security. Despite the revenue dip, Arista maintained a strong gross margin of 63.9%b, demonstrating resilience in its business model.
Arista continues to invest heavily in research and development, reflecting its commitment to innovation in cloud networking solutions. The company's strong balance sheet, with approximately $2.9 billionc in cash, cash equivalents, and marketable securities, provides ample liquidity for ongoing operations, strategic investments, and potential market downturns. Management remains optimistic about the long-term shift towards cloud networking, positioning Arista to capitalize on future growth opportunities.
02—Key points
Key Highlights
- Revenue for the fiscal year ended December 30, 2020, was $2.32 billion, a 3.9% decrease from the prior year, impacted by large customer sales fluctuations and COVID-19 supply constraints.
- Gross margin remained strong at 63.9%, slightly down from 64.1% in the prior year, indicating effective cost management despite revenue pressures.
- The company completed two strategic acquisitions in 2020: Big Switch Networks for network monitoring and Awake Security for network detection and response, expanding its integrated security and visibility offerings.
- Arista continues to prioritize R&D investment, increasing expenses by 5.2% to $486.6 million, underscoring its focus on innovation and platform development.
- The company ended the year with a robust liquidity position, holding $2.9 billion in cash, cash equivalents, and marketable securities, providing financial flexibility.
- Significant customer concentration exists, with Microsoft accounting for 21.5% of revenue in 2020, down from a combined 40% from Microsoft and Facebook in 2019, highlighting customer purchase timing variability.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Arista Networks, Inc. kept $0.27.
- Revenue$2.32B100.0%
- Cost of revenue−$835.6M36.1%
- Gross profit$1.48B63.9%
- Operating costs−$782.2M33.8%
- Operating income$699.7M30.2%
- Interest, other & tax−$65.1M2.8%
- Net income$634.6M27.4%
Where FY2020 revenue went
$2.32B- Cost of revenue: $835.6M, 36% of revenue
- Net income: $634.6M, 27% of revenue
- R&D: $486.6M, 21% of revenue
- Other operating costs: $295.6M, 13% of revenue
- Interest, other & tax: $65.1M, 2.8% of revenue
Kept 27% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 19, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $2.32B$2.41B | −3.9% |
| Cost of Revenue | $835.63M$866.37M | −3.5% |
| Gross Profit | $1.48B$1.54B | −4.0% |
| R&D Expenses | $486.59M$462.76M | +5.2% |
| Operating Expenses | $782.20M$738.56M | +5.9% |
| Operating Income | $699.68M$805.77M | −13.2% |
| Net Income | $634.56M$859.87M | −26.2% |
| EPS (Basic) | $0.52$0.70 | −25.9% |
| EPS (Diluted) | $0.50$0.67 | −24.8% |
| Shares Outstanding (Basic) | 1.22B1.22B | −0.4% |
| Shares Outstanding (Diluted) | 1.27B1.29B | −1.7% |
05—Questions
Frequently Asked Questions
What was Arista Networks' financial performance in 2020?
Arista Networks reported revenue of $2.32 billion for the fiscal year ended December 30, 2020, a slight decrease of 3.9% compared to 2019. This was primarily due to reduced sales to larger customers and supply chain disruptions related to COVID-19, partially offset by growth in service revenue. The gross margin remained strong at 63.9%.
How did Arista Networks expand its business in 2020?
In 2020, Arista Networks strategically expanded its product and service offerings through two key acquisitions: Big Switch Networks, to enhance its network monitoring and observability capabilities, and Awake Security, to strengthen its network detection and response (NDR) platform. These acquisitions aim to bolster Arista's integrated security and visibility solutions.
What is Arista Networks' outlook and strategy moving forward?
Arista Networks believes the future growth will be driven by the continued adoption of cloud networking technologies. The company plans to continue investing in research and development to enhance its software-driven, cognitive cloud networking solutions. Its strategy includes expanding its sales and marketing efforts globally and deepening relationships with partners to reach new customers and increase penetration in existing markets.
What were the key risks and challenges mentioned in the filing?
Key risks and challenges highlighted include the ongoing impact of the COVID-19 pandemic on business operations and demand, rapid evolution of the networking market, intense competition, supply chain disruptions, reliance on large customers, and potential product quality or security vulnerabilities. The company also faces risks associated with integrating acquired businesses and managing international operations.
06—Continue