Home Business Wire Arista Networks, Inc. Reports Fourth Quarter and Year End 2023 Financial Results

Arista Networks, Inc. Reports Fourth Quarter and Year End 2023 Financial Results

SANTA CLARA, Calif.–(BUSINESS WIRE)–Arista Networks, Inc. (NYSE: ANET), an industry leader in data-driven, client to cloud networking for large data center, campus and routing environments, today announced financial results for its fourth quarter and the full year ended December 31, 2023.


“I am truly honored to be a part of the leadership team that will drive Arista 2.0 products and technology for enterprise, cloud and AI customers,” said incoming CFO Chantelle Breithaupt. “As we enter 2024, we remain focused on satisfying their most demanding requirements with our compelling, innovative networking solutions.”

Full Year Financial Results

  • Revenue of $5,860.2 million, an increase of 33.8% compared to fiscal year 2022.
  • GAAP gross margin of 61.9%, compared to GAAP gross margin of 61.1% in fiscal year 2022.
  • Non-GAAP gross margin of 62.6%, compared to non-GAAP gross margin of 61.9% in fiscal year 2022.
  • GAAP net income of $2,087.3 million, or $6.58 per diluted share, compared to GAAP net income of $1,352.4 million, or $4.27 per diluted share, in fiscal year 2022.
  • Non-GAAP net income of $2,199.4 million or $6.94 per diluted share, compared to non-GAAP net income of $1,448.3 million or $4.58 per diluted share, in fiscal year 2022.

Fourth Quarter Financial Results

  • Revenue of $1,540.4 million, an increase of 2.1% compared to the third quarter of 2023, and an increase of 20.8% from the fourth quarter of 2022.
  • GAAP gross margin of 64.9%, compared to GAAP gross margin of 62.4% in the third quarter of 2023 and 60.3% in the fourth quarter of 2022.
  • Non-GAAP gross margin of 65.4%, compared to non-GAAP gross margin of 63.1% in the third quarter of 2023 and 61.0% in the fourth quarter of 2022.
  • GAAP net income of $613.6 million, or $1.92 per diluted share, compared to GAAP net income of $427.1 million, or $1.35 per diluted share, in the fourth quarter of 2022.
  • Non-GAAP net income of $664.3 million, or $2.08 per diluted share, compared to non-GAAP net income of $445.1 million, or $1.41 per diluted share, in the fourth quarter of 2022.

Commenting on the company’s financial results, Ita Brennan, Arista’s outgoing CFO said, “Our outstanding performance for 2023 epitomizes our focus on profitable revenue growth, expanding our enterprise and campus footprint while leveraging R&D and go-to-market investments across the business.”

Fourth Quarter Company Highlights

  • Arista 7130 Series Leads the Way to 25G Ultra-Low Latency Networking – announcing the next generation 7130 Series for ultra-low latency switching that accelerates 25G networking. With three new 25G optimized systems, enhanced performance optics, 25G ready FPGA applications and updates to the FDK (FPGA Development Kit), Arista is addressing the needs for 25G market data distribution and High-Frequency Trading (HFT) environments.
  • Arista Networks Unveils Zero Trust Networking Vision – announcing an expanded zero trust networking architecture that uses the underlying network infrastructure to break down security silos, streamline workflows and enable an integrated zero trust program. Through a combination of Arista-developed technologies and strategic alliances with key partners, this approach uses the network to compensate for harder-to-implement zero trust controls across the domains of devices, workloads, identity, and data.
  • Arista Networks Appoints New CFO – announcing the appointment of Chantelle Breithaupt as the company’s CFO, effective February 2024.

Full Year Company Highlights

Financial Outlook

For the first quarter of 2024, we expect:

  • Revenue between $1.52 billion to $1.56 billion;
  • Non-GAAP gross margin of approximately 62%; and
  • Non-GAAP operating margin of approximately 42%.

Guidance for non-GAAP financial measures excludes stock-based compensation expense, amortization of acquisition-related intangible assets, and other acquisition-related costs. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis because these exclusions can be uncertain or difficult to predict, including stock-based compensation expense which is impacted by the company’s future hiring and retention needs and the future fair market value of the company’s common stock. The actual amount of these exclusions will have a significant impact on the company’s GAAP gross margin and GAAP operating margin.

Prepared Materials and Conference Call Information

Arista’s executives will discuss the fourth quarter and year end 2023 financial results on a conference call at 1:30 p.m. Pacific time today. To listen to the call via telephone, dial (888) 330-2502 in the United States or +1 (240) 789-2713 from international locations. The Conference ID is 5655862.

The financial results conference call will also be available via live webcast on Arista’s investor relations website at https://investors.arista.com/. Shortly after the conclusion of the conference call, a replay of the audio webcast will be available on Arista’s investor relations website.

Forward-Looking Statements

This press release contains “forward-looking statements” regarding our future performance, including quotations from management, statements in the section entitled “Financial Outlook,” such as estimates regarding revenue, non-GAAP gross margin and non-GAAP operating margin for the first quarter of 2024 and statements regarding the benefits of Arista’s products. Forward-looking statements are subject to known and unknown risks, uncertainties, assumptions and other factors that could cause actual results, performance or achievements to differ materially from those anticipated in or implied by the forward-looking statements including risks associated with: large purchases by a limited number of customers who represent a substantial portion of our revenue; adverse economic and geopolitical conditions and conflicts, including inflationary pressures which result in increased component costs and reduced information technology and network infrastructure spending, the Russia/Ukraine, Israel/Hamas conflicts and the Houthi attacks on marine vessels in the Red Sea; changes in our customers technology roadmaps and priorities including the need for the rapid deployment of artificial intelligence (“AI”) and related technologies; the impact of sole or limited sources of supply, supply shortages and extended lead times or supply changes; volatility in our revenue growth rate; variations in our results of operations; the rapid evolution of the networking market; failure to successfully carry out new products and service offerings and expand into adjacent markets; variability in our gross margins; intense competition and industry consolidation; expansion of our international sales and operations; investments in or acquisitions of other businesses; seasonality and industry cyclicality; fluctuations in currency exchange rates; failure to raise additional capital on favorable terms; our inability to attract new large customers or sell additional products and services to our existing customers; sales of our switches generating most of our product revenue; large customers requiring more favorable terms; inability to increase market awareness or acceptance of our new products and services; decreases in the sales prices of our products and services; long and unpredictable sales cycles; declines in maintenance renewals by customers; product quality problems; failure to anticipate technological shifts; managing the supply of our products and product components; our dependence on third-party manufacturers to build our products; assertions by third parties of intellectual property rights infringement; failure to protect or assert our intellectual property rights; defects, errors or vulnerabilities in our products, the failure of our products to detect security breaches or incidents, the misuse of our products or the risks or product liability; enhanced U.S. tax, tariff, import/export restrictions, Chinese regulations or other trade barriers; failure to comply with government law and regulations; issues in the development and use of artificial intelligence, combined with an uncertain regulatory environment; and other future events. Additional risks and uncertainties that could affect us can be found in our most recent filings with the Securities and Exchange Commission including, but not limited to, our annual report on Form 10-K and quarterly reports on Form 10-Q. You can locate these reports through our website at https://investors.arista.com/ and on the SEC’s website at https://www.sec.gov/. All forward-looking statements in this press release are based on information available to the company as of the date hereof and we disclaim any obligation to publicly update or revise any forward-looking statement to reflect events that occur or circumstances that exist after the date on which they were made.

Non-GAAP Financial Measures

This press release and accompanying table contain certain non-GAAP financial measures including non-GAAP gross profit, non-GAAP gross margin, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income and non-GAAP diluted net income per share. These non-GAAP financial measures exclude stock-based compensation expense, amortization of acquisition-related intangibles and other acquisition-related expenses, gains/losses on strategic investments, an intellectual property dispute settlement, and the income tax effect of these non-GAAP exclusions. In addition, non-GAAP financial measures exclude net tax benefits associated with stock-based awards, which include excess tax benefits, and other discrete indirect effects of such awards. The company uses these non-GAAP financial measures internally in analyzing its financial results and believes that these non-GAAP financial measures are useful to investors as an additional tool to evaluate ongoing operating results and trends. In addition, these measures are the primary indicators management uses as a basis for its planning and forecasting for future periods.

Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for the comparable GAAP financial measures. Non-GAAP financial measures are subject to limitations, and should be read only in conjunction with the company’s consolidated financial statements prepared in accordance with GAAP. Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similarly titled measures presented by other companies. A description of these non-GAAP financial measures and a reconciliation of the company’s non-GAAP financial measures to their most directly comparable GAAP measures have been provided in the financial statement tables included in this press release, and investors are encouraged to review the reconciliation.

About Arista Networks

Arista Networks is an industry leader in data-driven, client to cloud networking for large data center, campus and routing environments. Arista’s award-winning platforms deliver availability, agility, automation, analytics and security through an advanced network operating stack. For more information, visit https://www.arista.com.

ARISTA, EOS, CloudVision, NetDL and AVA are among the registered and unregistered trademarks of Arista Networks, Inc. in jurisdictions around the world. Other company names or product names may be trademarks of their respective owners. Additional information and resources can be found at www.arista.com.

ARISTA NETWORKS, INC.

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except per share amounts)

 

 

 

 

 

 

 

Three Months Ended

December 31,

 

Twelve Months Ended

December 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

Revenue:

 

 

 

 

 

 

 

 

Product

 

$

1,310,314

 

$

1,096,866

 

$

5,029,493

 

$

3,716,079

Service

 

 

230,123

 

 

178,686

 

 

830,675

 

 

665,231

Total revenue

 

 

1,540,437

 

 

1,275,552

 

 

5,860,168

 

 

4,381,310

Cost of revenue:

 

 

 

 

 

 

 

 

Product

 

 

495,826

 

 

471,617

 

 

2,061,167

 

 

1,573,629

Service

 

 

45,385

 

 

35,329

 

 

168,720

 

 

131,985

Total cost of revenue

 

 

541,211

 

 

506,946

 

 

2,229,887

 

 

1,705,614

Total gross profit

 

 

999,226

 

 

768,606

 

 

3,630,281

 

 

2,675,696

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

211,481

 

 

190,423

 

 

854,918

 

 

728,394

Sales and marketing

 

 

105,538

 

 

85,443

 

 

399,034

 

 

326,955

General and administrative

 

 

42,293

 

 

23,821

 

 

119,080

 

 

93,241

Total operating expenses

 

 

359,312

 

 

299,687

 

 

1,373,032

 

 

1,148,590

Income from operations

 

 

639,914

 

 

468,919

 

 

2,257,249

 

 

1,527,106

Other income, net

 

 

54,477

 

 

16,926

 

 

164,777

 

 

54,690

Income before income taxes

 

 

694,391

 

 

485,845

 

 

2,422,026

 

 

1,581,796

Provision for income taxes

 

 

80,755

 

 

58,756

 

 

334,705

 

 

229,350

Net income

 

$

613,636

 

$

427,089

 

$

2,087,321

 

$

1,352,446

Earnings per share:

 

 

 

 

 

 

 

 

Basic

 

$

1.97

 

$

1.39

 

$

6.75

 

$

4.41

Diluted

 

$

1.92

 

$

1.35

 

$

6.58

 

$

4.27

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

311,612

 

 

306,162

 

 

309,354

 

 

306,473

Diluted

 

 

318,845

 

 

315,201

 

 

317,135

 

 

316,459

ARISTA NETWORKS, INC.

Reconciliation of Selected GAAP to Non-GAAP Financial Measures

(Unaudited, in thousands, except percentages and per share amounts)

 

 

 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

GAAP gross profit

 

$

999,226

 

 

$

768,606

 

 

$

3,630,281

 

 

$

2,675,696

 

GAAP gross margin

 

 

64.9

%

 

 

60.3

%

 

 

61.9

%

 

 

61.1

%

Stock-based compensation expense

 

 

3,273

 

 

 

3,075

 

 

 

12,789

 

 

 

9,688

 

Intangible asset amortization

 

 

4,195

 

 

 

6,821

 

 

 

23,457

 

 

 

25,374

 

Non-GAAP gross profit

 

$

1,006,694

 

 

$

778,502

 

 

$

3,666,527

 

 

$

2,710,758

 

Non-GAAP gross margin

 

 

65.4

%

 

 

61.0

%

 

 

62.6

%

 

 

61.9

%

 

 

 

 

 

 

 

 

 

GAAP income from operations

 

$

639,914

 

 

$

468,919

 

 

$

2,257,249

 

 

$

1,527,106

 

Stock-based compensation expense

 

 

81,358

 

 

 

64,954

 

 

 

296,756

 

 

 

230,934

 

Intangible asset amortization

 

 

6,690

 

 

 

9,316

 

 

 

33,437

 

 

 

33,650

 

Acquisition-related costs(1)

 

 

 

 

 

 

 

 

 

 

 

4,691

 

Legal settlement (2)

 

 

16,000

 

 

 

 

 

 

16,000

 

 

 

 

Non-GAAP income from operations

 

$

743,962

 

 

$

543,189

 

 

$

2,603,442

 

 

$

1,796,381

 

Non-GAAP operating margin

 

 

48.3

%

 

 

42.6

%

 

 

44.4

%

 

 

41.0

%

 

 

 

 

 

 

 

 

 

GAAP net income

 

$

613,636

 

 

$

427,089

 

 

$

2,087,321

 

 

$

1,352,446

 

Stock-based compensation expense

 

 

81,358

 

 

 

64,954

 

 

 

296,756

 

 

 

230,934

 

Intangible asset amortization

 

 

6,690

 

 

 

9,316

 

 

 

33,437

 

 

 

33,650

 

Acquisition-related costs(1)

 

 

 

 

 

 

 

 

 

 

 

4,691

 

Gain on strategic investments

 

 

 

 

 

(3,358

)

 

 

(18,699

)

 

 

(27,479

)

Tax benefit on stock-based awards

 

 

(40,561

)

 

 

(37,177

)

 

 

(174,122

)

 

 

(113,502

)

Income tax effect on non-GAAP exclusions

 

 

(12,795

)

 

 

(15,677

)

 

 

(41,283

)

 

 

(32,482

)

Legal settlement (2)

 

 

16,000

 

 

 

 

 

 

16,000

 

 

 

 

Non-GAAP net income

 

$

664,328

 

 

$

445,147

 

 

$

2,199,410

 

 

$

1,448,258

 

 

 

 

 

 

 

 

 

 

GAAP diluted net income per share

 

$

1.92

 

 

$

1.35

 

 

$

6.58

 

 

$

4.27

 

Non-GAAP adjustments to net income

 

 

0.16

 

 

 

0.06

 

 

 

0.36

 

 

 

0.31

 

Non-GAAP diluted net income per share

 

$

2.08

 

 

$

1.41

 

 

$

6.94

 

 

$

4.58

 

Weighted-average shares used in computing diluted net income per share

 

 

318,845

 

 

 

315,201

 

 

 

317,135

 

 

 

316,459

 

Summary of Stock-Based Compensation Expense:

 

 

 

 

 

 

 

 

Cost of revenue

 

$

3,273

 

 

$

3,075

 

 

$

12,789

 

 

$

9,688

 

Research and development

 

 

46,506

 

 

 

37,174

 

 

 

172,177

 

 

 

130,897

 

Sales and marketing

 

 

19,613

 

 

 

15,532

 

 

 

71,074

 

 

 

57,571

 

General and administrative

 

 

11,966

 

 

 

9,173

 

 

 

40,716

 

 

 

32,778

 

Total

 

$

81,358

 

 

$

64,954

 

 

$

296,756

 

 

$

230,934

 

___________________

(1) Represents costs associated with business combinations, which primarily include retention bonuses, and professional and consulting fees.

(2) In the quarter ended December 31, 2023, we agreed to pay $16 million to settle an intellectual property dispute and we recorded this amount to general and administrative expenses.

ARISTA NETWORKS, INC.

Condensed Consolidated Balance Sheets

(Unaudited, in thousands)

 

 

 

December 31,

2023

 

December 31,

2022

ASSETS

 

 

 

 

CURRENT ASSETS:

 

 

 

 

Cash and cash equivalents

 

$

1,938,606

 

 

$

671,707

 

Marketable securities

 

 

3,069,362

 

 

 

2,352,022

 

Accounts receivable

 

 

1,024,569

 

 

 

923,096

 

Inventories

 

 

1,945,180

 

 

 

1,289,706

 

Prepaid expenses and other current assets

 

 

412,518

 

 

 

314,217

 

Total current assets

 

 

8,390,235

 

 

 

5,550,748

 

Property and equipment, net

 

 

101,580

 

 

 

95,009

 

Acquisition-related intangible assets, net

 

 

88,768

 

 

 

122,205

 

Goodwill

 

 

268,531

 

 

 

265,924

 

Deferred tax assets

 

 

945,792

 

 

 

574,912

 

Other assets

 

 

151,900

 

 

 

166,612

 

TOTAL ASSETS

 

$

9,946,806

 

 

$

6,775,410

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

Accounts payable

 

$

435,059

 

 

$

232,572

 

Accrued liabilities

 

 

407,302

 

 

 

292,487

 

Deferred revenue

 

 

915,204

 

 

 

637,432

 

Other current liabilities

 

 

152,041

 

 

 

131,040

 

Total current liabilities

 

 

1,909,606

 

 

 

1,293,531

 

Income taxes payable

 

 

95,751

 

 

 

89,839

 

Deferred revenue, non-current

 

 

591,000

 

 

 

403,814

 

Other long-term liabilities

 

 

131,390

 

 

 

102,406

 

TOTAL LIABILITIES

 

 

2,727,747

 

 

 

1,889,590

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

Common stock

 

 

31

 

 

 

31

 

Additional paid-in capital

 

 

2,108,331

 

 

 

1,780,714

 

Retained earnings

 

 

5,114,025

 

 

 

3,138,983

 

Accumulated other comprehensive income (loss)

 

 

(3,328

)

 

 

(33,908

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

7,219,059

 

 

 

4,885,820

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

9,946,806

 

 

$

6,775,410

 

 

ARISTA NETWORKS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)

 

 

 

Twelve Months Ended December 31,

 

 

 

2023

 

 

 

2022

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

Net income

 

$

2,087,321

 

 

$

1,352,446

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation, amortization and other

 

 

70,630

 

 

 

62,700

 

Noncash lease expense

 

 

18,236

 

 

 

18,648

 

Stock-based compensation

 

 

296,756

 

 

 

230,934

 

Deferred income taxes

 

 

(370,796

)

 

 

(244,382

)

Gain on strategic investments

 

 

(18,699

)

 

 

(27,479

)

Amortization of investment premiums

 

 

(33,518

)

 

 

12,767

 

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable, net

 

 

(101,473

)

 

 

(401,531

)

Inventories

 

 

(655,474

)

 

 

(638,948

)

Other assets

 

 

(66,401

)

 

 

(117,465

)

Accounts payable

 

 

198,612

 

 

 

31,436

 

Other liabilities

 

 

123,694

 

 

 

70,704

 

Deferred revenue

 

 

464,958

 

 

 

98,957

 

Income taxes, net

 

 

20,168

 

 

 

44,026

 

Net cash provided by operating activities

 

 

2,034,014

 

 

 

492,813

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

Proceeds from maturities of marketable securities

 

 

1,887,939

 

 

 

1,643,824

 

Proceeds from sale of marketable securities

 

 

67,284

 

 

 

193,782

 

Purchases of marketable securities

 

 

(2,606,878

)

 

 

(1,418,857

)

Purchases of property, equipment and intangible assets

 

 

(34,434

)

 

 

(44,644

)

Cash paid for business combination, net of cash acquired

 

 

1,799

 

 

 

(145,087

)

Investment in notes and privately-held companies

 

 

(3,164

)

 

 

(12,691

)

Net cash provided by (used in) investing activities

 

 

(687,454

)

 

 

216,327

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

Proceeds from issuance of common stock under equity plans

 

 

62,093

 

 

 

48,411

 

Tax withholding paid on behalf of employees for net share settlement

 

 

(33,563

)

 

 

(32,725

)

Repurchase of common stock

 

 

(112,279

)

 

 

(670,287

)

Net cash used in financing activities

 

 

(83,749

)

 

 

(654,601

)

Effect of exchange rate changes

 

 

675

 

 

 

(3,611

)

NET INCREASE/(DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

1,263,486

 

 

 

50,928

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH —Beginning of period

 

 

675,978

 

 

 

625,050

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH —End of period

 

$

1,939,464

 

 

$

675,978

 

 

Contacts

Investor Contacts:

Arista Networks, Inc.

Liz Stine, 408-547-5885

Director, Investor Relations

liz@arista.com

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