Why is Arista splitting its stock, and what does it mean for shareholders?

The board approved a four-for-one forward split to make the shares more accessible to a broader base of investors. Each holder receives three additional shares for every share held at the effective time, December 3, 2024. Trading is expected to be split-adjusted starting before market open on December 4, 2024. The split changes the share count and price per share but not the total market value of an investor's holding.

How strong was Arista's Q3 2024 profitability?

Profitability was strong. GAAP net income was $747.9 million, up from $545.3 million a year earlier, and non-GAAP operating income was $890.1 million, a 49.1% margin versus 46.1% in Q3 2023. Operating leverage drove the improvement, as operating expenses grew more slowly than revenue.

What is the outlook for Q4 2024, and are margins expected to change?

Management guided to Q4 2024 revenue of $1.85 to $1.90 billion, non-GAAP gross margin of about 63% to 64%, and non-GAAP operating margin of about 44%. Compared with Q3's 64.6% gross margin and 49.1% operating margin, the guidance implies meaningful sequential margin compression. Investors will want to understand the drivers, which could include product mix toward AI systems, component costs, and pricing.

Is Arista's revenue growth supported by future demand?

Deferred revenue provides some support. Current deferred revenue rose to $1.60 billion and non-current deferred revenue to $0.91 billion at September 30, 2024, compared with $0.92 billion and $0.59 billion at year-end 2023. This suggests customers have committed to purchases that have not yet been recognized as revenue. Operating cash flow of $2.68 billion for the first nine months also reflects this strength.

Does this filing create legal liability for the company's press release?

Under Item 2.02, the press release is furnished rather than filed. It is therefore not deemed filed for purposes of Section 18 of the Exchange Act and is not incorporated by reference into Securities Act or Exchange Act filings unless expressly stated. This limits certain liability while still making the information publicly available.

ANET 8-K: Earnings & Results

01—Abstract

Summary

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

Arista Networks (ANET) reported third quarter 2024 results on November 7, 2024, with revenue of $1.811 billion^a, up 20.0% year over year and 7.1% sequentially.

GAAP net income was $747.9 million^b, or $2.33 per diluted share, versus $1.72 a year earlier, and non-GAAP diluted EPS was $2.40 versus $1.83. Margins moderated slightly: GAAP gross margin was 64.2% (62.4% a year ago) and non-GAAP gross margin was 64.6% (down from 65.4% in Q2 2024), while non-GAAP operating margin reached 49.1% versus 46.1% in Q3 2023. Growth was driven by strong product and service revenue, with product revenue of $1.524 billion and service revenue of $287 million.

Balance sheet strength continued to build. Cash and equivalents rose to $3.18 billion and marketable securities to $4.25 billion^c, while deferred revenue (current plus non-current) climbed to roughly $2.5 billion, up sharply from year-end 2023, which points to strong forward demand visibility. Operating cash flow for the first nine months was $2.68 billion, and the company repurchased $300 million of stock in that period.

The company also announced a four-for-one forward stock split, effective with a December 3, 2024 amendment, with split-adjusted trading expected to begin December 4, 2024. For Q4 2024, Arista guided to revenue of $1.85 billion to $1.90 billion^d, non-GAAP gross margin of approximately 63% to 64%, and non-GAAP operating margin of approximately 44%.

The guidance implies a sequential margin step-down, and investors will watch whether AI-related customer mix and component costs keep pressure on margins. The filing furnishes rather than files the press release under Item 2.02, so it is not subject to Section 18 liability.

02—Key points

Key Highlights

Q3 2024 revenue of $1.811 billion, up 20.0% year over year and 7.1% sequentially
GAAP diluted EPS of $2.33 and non-GAAP diluted EPS of $2.40, versus $1.72 and $1.83 in Q3 2023
Non-GAAP operating margin expanded to 49.1% from 46.1% a year earlier, while non-GAAP gross margin eased to 64.6% from 65.4% in Q2 2024
Four-for-one forward stock split approved, effective December 3, 2024, with split-adjusted trading starting December 4, 2024
Q4 2024 guidance of $1.85 to $1.90 billion in revenue, ~63% to 64% non-GAAP gross margin, and ~44% non-GAAP operating margin
Deferred revenue (current and non-current) rose to about $2.5 billion, signaling strong forward demand visibility
Cash and marketable securities totaled about $7.4 billion at quarter end, with $300 million in share repurchases over nine months

03—Questions

Frequently Asked Questions

Why is Arista splitting its stock, and what does it mean for shareholders?
The board approved a four-for-one forward split to make the shares more accessible to a broader base of investors. Each holder receives three additional shares for every share held at the effective time, December 3, 2024. Trading is expected to be split-adjusted starting before market open on December 4, 2024. The split changes the share count and price per share but not the total market value of an investor's holding.
How strong was Arista's Q3 2024 profitability?
Profitability was strong. GAAP net income was $747.9 million, up from $545.3 million a year earlier, and non-GAAP operating income was $890.1 million, a 49.1% margin versus 46.1% in Q3 2023. Operating leverage drove the improvement, as operating expenses grew more slowly than revenue.
What is the outlook for Q4 2024, and are margins expected to change?
Management guided to Q4 2024 revenue of $1.85 to $1.90 billion, non-GAAP gross margin of about 63% to 64%, and non-GAAP operating margin of about 44%. Compared with Q3's 64.6% gross margin and 49.1% operating margin, the guidance implies meaningful sequential margin compression. Investors will want to understand the drivers, which could include product mix toward AI systems, component costs, and pricing.
Is Arista's revenue growth supported by future demand?
Deferred revenue provides some support. Current deferred revenue rose to $1.60 billion and non-current deferred revenue to $0.91 billion at September 30, 2024, compared with $0.92 billion and $0.59 billion at year-end 2023. This suggests customers have committed to purchases that have not yet been recognized as revenue. Operating cash flow of $2.68 billion for the first nine months also reflects this strength.
Does this filing create legal liability for the company's press release?
Under Item 2.02, the press release is furnished rather than filed. It is therefore not deemed filed for purposes of Section 18 of the Exchange Act and is not incorporated by reference into Securities Act or Exchange Act filings unless expressly stated. This limits certain liability while still making the information publicly available.

04—Continue

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