10-QPeriod: Q1 FY2021

Arista Networks, Inc. Quarterly Report for Q1 Ended Mar 31, 2021

Filed May 6, 2021For Securities:ANET

Summary

Arista Networks, Inc. reported strong revenue growth in the first quarter of 2021, with total revenue reaching $667.6 million, a significant increase of 27.6% year-over-year. This growth was primarily driven by a 31.2% surge in product revenue, indicating robust demand for their switching and routing platforms. Service revenue also saw a healthy increase of 14.5%. The company's profitability improved, with net income rising by 30.3% to $180.4 million, translating to diluted earnings per share of $2.27, up from $1.73 in the prior year's quarter. Despite supply chain challenges exacerbated by the COVID-19 pandemic, Arista demonstrated resilience by effectively managing its operations and delivering strong financial results. The company's balance sheet remains strong, with over $3 billion in cash, cash equivalents, and marketable securities, providing ample liquidity to fund ongoing operations and strategic initiatives. Management expressed confidence in meeting future working capital requirements and growth strategies.

Financial Highlights

52 data points
Beta

Revenue

$667.56M

63.7% Gross Margin

Net Income

$180.37M

27.0% Net Margin

EPS (Diluted)

$0.14

Total Assets

$4.89B

Cash & Equivalents

$847.57M

Free Cash Flow

$249.58M

Financial Statements
Beta
Revenue$667.56M
Cost of Revenue$242.29M
Gross Profit$425.27M
R&D Expenses$132.49M
Operating Expenses$218.98M
Operating Income$206.29M
Net Income$180.37M
EPS (Basic)$0.15
EPS (Diluted)$0.14
Shares Outstanding (Basic)1.22B
Shares Outstanding (Diluted)1.27B

Key Highlights

  • 1Total revenue increased by 27.6% year-over-year to $667.6 million.
  • 2Product revenue grew by a substantial 31.2% year-over-year.
  • 3Net income increased by 30.3% year-over-year to $180.4 million.
  • 4Diluted earnings per share (EPS) rose to $2.27 from $1.73 in the prior year's quarter.
  • 5Gross margin slightly decreased to 63.7% from 64.7% due to product transition costs and inventory charges.
  • 6Operating expenses increased overall, with R&D and Sales & Marketing showing significant growth, reflecting continued investment in product development and market expansion.
  • 7The company reported strong operating cash flow of $254.7 million.

Frequently Asked Questions

Arista Networks demonstrated strong performance in Q1 2021, with total revenue increasing by 27.6% year-over-year to $667.6 million. Net income rose by 30.3% to $180.4 million, and diluted EPS grew from $1.73 to $2.27.

The primary driver of Arista's revenue growth in Q1 2021 was its product revenue, which increased by 31.2%, indicating strong demand for its switching and routing platforms. Service revenue also contributed with a 14.5% increase, reflecting growth in support contracts.

Arista Networks maintains a strong financial position with over $3 billion in cash, cash equivalents, and marketable securities as of March 31, 2021. The company generated robust operating cash flow of $254.7 million in the quarter, indicating sufficient liquidity to meet its working capital needs and fund growth strategies for at least the next 12 months.

The company highlighted ongoing supply chain challenges related to the COVID-19 pandemic, which have led to increased lead times and some product transition costs impacting gross margins. They also noted intense competition in the networking market and the inherent risks associated with global operations and rapid technological evolution.