Summary
Arista Networks, Inc. reported total revenue of $540.6 million for the second quarter of 2020, a decrease of 11.1% compared to the same period in 2019, largely due to a 17.9% decline in product revenue. This was partially offset by a 25.2% increase in service revenue. The company cited COVID-19 related supply chain constraints and extended lead times as contributing factors to the revenue decrease, along with a planned decline in revenue from large cloud titan customers. Despite the revenue dip, gross margin remained relatively stable at 63.7%. Operating expenses decreased by 3.4% year-over-year, driven by reductions in R&D and G&A, although S&M expenses saw a slight increase. Net income for the quarter was $144.8 million, down from $189.3 million in Q2 2019, resulting in diluted EPS of $1.83 compared to $2.33 in the prior year. The company continued to manage its cash effectively, ending the quarter with $800.2 million in cash and cash equivalents, and $1.98 billion in marketable securities. Arista also highlighted the acquisition of Big Switch Networks in February 2020, aimed at expanding data center networking solutions, and the ongoing stock repurchase program. Management anticipates an expected year-over-year revenue decline for the full fiscal year 2020, citing continued COVID-19 impacts on demand and supply chains. Despite these challenges, the company remains focused on investing in R&D and sales activities to maintain its technological leadership.
Financial Highlights
52 data points| Revenue | $540.57M |
| Cost of Revenue | $196.48M |
| Gross Profit | $344.09M |
| R&D Expenses | $111.54M |
| Operating Expenses | $177.10M |
| Operating Income | $166.99M |
| Net Income | $144.79M |
| EPS (Basic) | $0.12 |
| EPS (Diluted) | $0.11 |
| Shares Outstanding (Basic) | 1.21B |
| Shares Outstanding (Diluted) | 1.27B |
Key Highlights
- 1Total revenue for Q2 2020 was $540.6 million, down 11.1% year-over-year, primarily driven by a 17.9% decrease in product revenue to $421.4 million.
- 2Service revenue increased by 25.2% to $119.2 million, indicating growth in post-contract support and renewals.
- 3Gross margin remained resilient, holding at 63.7% compared to 64.1% in Q2 2019, despite pricing pressures and a shift in customer mix.
- 4Net income decreased by 23.9% to $144.8 million, leading to a diluted EPS of $1.83, down from $2.33 in Q2 2019.
- 5The company ended the quarter with a strong liquidity position, including $800.2 million in cash and cash equivalents and $1.98 billion in marketable securities.
- 6Arista completed the acquisition of Big Switch Networks for $68.0 million in February 2020 to enhance its data center networking and network monitoring capabilities.
- 7The company expects a year-over-year revenue decline for the full fiscal year 2020 due to ongoing COVID-19 impacts on supply chains and customer demand.