Arista Networks reported fourth-quarter earnings that handily beat estimates while revenue slightly beat consensus estimates. Guidance for ANET stock edged by Wall Street targets. Arista stock fell on the news.
The maker of cloud computing network gear reported its results after the market close on Monday. Heading into the earnings report, ANET stock had advanced 112% over the past year and 20% in 2024.
On the stock market today, Arista stock fell 5.5% to close at 265.51. Arista is among artificial intelligence stocks to watch.
ANET Stock: Cloud Versus Enterprise Growth
"Arista reported a modest revenue beat for the quarter ($6 million), with revenue up 21% year-over-year, as tougher comparisons, a moderating networking demand environment and a push-out of some cloud revenue recognition to the first quarter impacted performance," said William Blair Sebastien Naji in a report.
Naji added: "Revenue guidance for the first quarter was modestly ahead of consensus, equating to 14% growth year-over-year. Management also reiterated its full year 2024 guidance of 11% revenue growth."
At Evercore ISI, analyst Amit Daryanani said in a report: "We see ANET's guide for 2024 at 10% to 12% and their expectation of $750 million AI revenues in 2025 as both rather conservative and should result in the company sustaining beats/raises through the year."
For the three months ended Dec. 31, Arista earnings popped 48% to $2.08 per share. Lower taxes boosted profit. Also, revenue jumped 21% $1.54 billion.
Analysts estimated Arista earnings per share of $1.70 on an adjusted basis with revenue of $1.53 billion. A year earlier, Arista earnings were $1.41 per share on revenue of $1.27 billion.
Guidance For Arista Stock
"Cloud continues to dominate Arista's sales mix at 46% of 2023 revenue," said Raymond James analyst Simon Leopold in a report. "Enterprise revenue grew 50% in 2023 and the Q4 contribution boosted gross margin."
For the current quarter ending March 31, Arista predicted revenue of $1.54 billion at the midpoint of guidance, flat quarter-over-quarter, edging by estimates of $1.53 billion.
Analysts expect revenue growth for ANET stock to slow to 12% in 2024 from nearly 34% in 2023.
Also, Arista's biggest customers are Microsoft and Facebook-parent Meta Platforms. Newer customers include Oracle and Google-parent Alphabet.
ANET stock holds a Relative Strength Rating of 96 out of a best-possible 99, according to IBD Stock Check-up.
Arista sells computer network switches that speed up communications in internet data centers. Further, its chief rivals are Cisco Systems and Juniper Networks.
Artificial Intelligence Upside Expected
According to analysts, Arista is gaining ground in the so-called "enterprise" market — large companies, government agencies and educational institutions.
"Enterprise up-ticked in Q4 and is now close to 40% of revenue by our math as Arista continues to execute on share gains and new product offerings," said Keybanc Capital analyst Thomas Blakey, in a report.
By 2025, some analysts expect ANET stock to get a boost from customer investments in artificial intelligence infrastructure. Internet data centers will need more computing power and network bandwidth to process AI workloads.
"With component lead times easing and visibility normalizing and becoming more limited, growth/backlog is now declining," said Oppenheimer analyst Kidron Singh in a report. "While this is a near-term concern for investors, we expect Arista to continue gaining switching share, benefit from AI, and make meaningful inroads into (enterprise) campus and WAN, offsetting headwinds."
Follow Reinhardt Krause on X, formerly called Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
