Arista Stock Is Rising. Profits Topped Estimates.

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Arista

Networks stock is gaining ground in late trading Monday after the networking-infrastructure provider posted better-than-expected results for the December quarter.

Arista (ticker: ANET) providers routers and other networking gear to cloud providers, with

Microsoft

(MSFT) and

Meta Platforms

(META) the company’s two largest customers. In the latest quarter, Meta was 25.5% of revenue, with Microsoft accounting for another 15%. In short, Arista continues to be a beneficiary of the growth in cloud-computing demand.

On a call with the Street, the company noted that “cloud titans” now account for 46% of revenue, with revenue from that group growing triple digits in the fourth quarter.

Arista reported fourth-quarter revenue of $1.28 billion, up 55% from a year earlier, and ahead of the Street consensus at $1.2 billion. Non-GAAP profits were $1.41 a share, 20 cents above the Street consensus view at $1.21 a share. Under generally accepted accounting principles, the company earned $1.35 a share.

Arista stock in late trading is 2% higher, to $138.71.

For all of 2022, Arista had $4.38 billion of revenue, up 49% from the previous year, with non-GAAP profits of $4.58 a share, up from $2.87 a year earlier.

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Arista projects first-quarter revenue of $1.275 billion to $1.325 billion, with non-GAAP gross margin of 60%, down from 61% in the fourth quarter, and non-GAAP operating margin of 40%, down from 42.6% in the fourth quarter. For the quarter, Street consensus estimates call for revenue of $1.21 billion. At the middle of the range, revenue growth would be 48%.

For all of 2023, the company sees top-line growth of about 25%, with year-over-year comparisons getting tougher as the year unfolds.

One quarter ago, Arista provided a detailed forward business model. The company projected non-GAAP gross margin of 61% to 63% for 2023, with a long-term target (through 2025) of 61% to 64%. Arista projected research and development for 2023 to be 14% of revenue, with a long-term target of 15%. Operating margin was projected to be about 40%, with a long-term view of 38%.

Write to Eric J. Savitz at [email protected]