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Arista Networks, Inc. 8-K Report, Financial Results (May 7, 2024)

Reports
Earnings & Results·Other Events·Exhibits & Filings
Filing Date
Filed May 7, 2024
Period End
May 3, 2024
Security
ANET
In the record · 2016–202610-K1110-Q348-K80

ANET filed 11 annual reports (10-K), 34 quarterly reports (10-Q) and 80 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · Aug ’18Aug ’18
  2. Leadership change8-K · Jul ’21Jul ’21
  3. Leadership change8-K · Sep ’25Sep ’25

01—Abstract

Summary

Summary of the 8-K filed May 7, 2024. Cited figures are marked; the original filing is the authoritative source.

Arista Networks reported first quarter 2024 results on May 7, 2024, with revenue of $1.571 billiona, up 16.3% year over year and 2.0% sequentially.

Growth was driven by both product revenue ($1.329 billionb, up roughly 13% year over year) and service revenue ($242.5 million, up roughly 35%). GAAP net income rose to $637.7 million, or $1.99 per diluted share, versus $1.38 a year earlier, and GAAP and non-GAAP figures were identical for the quarter because non-GAAP adjustments were zero in 2024 Q1. Non-GAAP operating margin expanded to 47.4% from 41.2%, although gross margin moderated sequentially to 64.2% non-GAAP (from 65.4% in Q4 2023) and to 63.7% GAAP.

For the second quarter of 2024, management guided to revenue of $1.62 billion to $1.65 billionc, non-GAAP gross margin of about 64%, and non-GAAP operating margin of about 44%. The implied guidance points to continued sequential growth but a lower operating margin than Q1, which investors will want to weigh against the company's expense trajectory. Sequential gross margin softness and the move in operating margin are the key items to monitor.

Separately, the board authorized a new $1.2 billiond share repurchase program on May 3, 2024, running through May 2027, following $2 billion of repurchases under prior programs. The company had about 313.4 million shares outstanding as of May 2, 2024. Repurchases in Q1 totaled $62.7 million, a modest amount relative to the new authorization.

The program is discretionary and can be suspended at any time. Cash, cash equivalents and marketable securities together reached about $5.45 billion at quarter end, supporting the buyback capacity.

02—Key points

Key Highlights

  1. Revenue of $1.571 billion, up 16.3% year over year and 2.0% sequentially, with service revenue growing about 35% year over year to $242.5 million.
  2. GAAP net income of $637.7 million, or $1.99 per diluted share, up from $1.38 per diluted share a year earlier; non-GAAP and GAAP results were identical this quarter.
  3. Non-GAAP operating margin expanded to 47.4% from 41.2% in Q1 2023, driven by operating leverage as operating expenses grew more slowly than revenue.
  4. Gross margin declined sequentially: GAAP gross margin was 63.7% and non-GAAP gross margin was 64.2%, versus 64.9% and 65.4% respectively in Q4 2023.
  5. Q2 2024 guidance calls for revenue of $1.62 billion to $1.65 billion, non-GAAP gross margin of about 64%, and non-GAAP operating margin of about 44%.
  6. New $1.2 billion stock repurchase authorization approved May 3, 2024, expiring May 2027, on top of $2 billion completed under prior programs.
  7. Cash, cash equivalents and marketable securities totaled roughly $5.45 billion at March 31, 2024, up from about $5.0 billion at year-end 2023, and operating cash flow was $513.8 million in the quarter.

03—Questions

Frequently Asked Questions

  1. How did Arista perform compared with the prior year quarter?

    Revenue grew 16.3% to $1.571 billion, GAAP net income rose to $637.7 million from $436.5 million, and GAAP diluted EPS increased to $1.99 from $1.38. Non-GAAP operating margin improved to 47.4% from 41.2%, reflecting strong revenue growth against a slower increase in operating expenses.

  2. Is Arista's gross margin under pressure?

    Gross margin improved year over year, rising to 64.2% non-GAAP from 60.3%, but it declined sequentially from 65.4% in Q4 2023. The Q2 2024 guidance of about 64% non-GAAP gross margin suggests management expects modest further pressure, so investors should watch component costs and product mix.

  3. What does the new $1.2 billion buyback mean for shareholders?

    The authorization gives the company flexibility to repurchase shares through May 2027, but it does not obligate any specific level of buybacks, and the program can be suspended at any time. Q1 2024 repurchases were only about $62.7 million, so actual execution pace will determine the impact on share count, which stood at about 313.4 million shares as of May 2, 2024.

  4. What is the outlook for the second quarter of 2024?

    Management expects revenue between $1.62 billion and $1.65 billion, implying roughly 3% to 5% sequential growth. It also guided to non-GAAP gross margin of about 64% and non-GAAP operating margin of about 44%, which is below the 47.4% achieved in Q1, indicating expected higher operating spending or other cost pressure.

  5. Does the company have the financial capacity to fund its buyback and growth plans?

    Yes. Arista ended the quarter with about $2.09 billion in cash and cash equivalents and $3.36 billion in marketable securities, and generated $513.8 million in operating cash flow in Q1 2024. Shareholders' equity rose to $7.86 billion, and the company funds repurchases from working capital.

04—Continue

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