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Arista (ANET) Beats Q1 Earnings Estimates on Record Revenues
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Arista Networks, Inc. (ANET - Free Report) reported strong first-quarter 2022 results, wherein both the bottom and the top lines beat the respective Zacks Consensus Estimate, driven by solid demand trends and healthy customer additions. Adjusted earnings and revenues also improved year over year.
Net Income
On a GAAP basis, net income in the reported quarter improved to $272.3 million or 85 cents per share from $180.4 million or 57 cents per share in the prior-year quarter, primarily driven by top-line growth.
Excluding non-recurring items, non-GAAP net income was $268.5 million or 84 cents per share compared with $198.8 million or 62 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 3 cents.
Arista Networks, Inc. Price, Consensus and EPS Surprise
Despite supply chain disruptions, total revenues were record high and soared 31.4% year over year to $877.1 million. The top line surpassed the company’s guidance of $840-$860 million and exceeded the consensus estimate of $854 million. The rise was primarily led by solid customer additions and growth in the enterprise vertical along with accelerated shipments to cloud titan customers that were mostly deferred from the previous quarter.
Arista generated 76% of total quarterly revenues from the Americas and the remainder from international operations. Product revenues increased to $724.7 million from $539.1 million on healthy traction from existing products and ramp up of newer ones with a successful transition from prototype to trials. Service revenues grew to $152.3 million from $128.4 million, supported by renewals and subscriptions. Cloud titans were the largest in terms of the vertical mix, followed by enterprise, specialty cloud providers, financials and service providers. The company maintained its leading position in 100, 200 and 400-gig switching and achieved a solid market control in client to cloud networking domain.
Other Details
Non-GAAP gross profit improved to $560.9 million from $432.1 million for respective margins of 63.9% and 64.7%. The non-GAAP gross margin was at the higher end of the company’s guidance of 63-64%, reflecting healthy software and services mix.
Total operating expenses increased to $275.9 million from $219 million in the prior-year quarter, owing to higher R&D costs, increased variable compensation and other headcount-related charges, partially offset by lower COVID-related travel and marketing expenses. Non-GAAP operating income increased to $335.6 million from $251.3 million in the year-ago quarter, with corresponding margins of 38.3% and 37.6%, respectively.
With improved customer demand and order visibility, the company is taking decisive steps to improve inventory levels and manufacturing capacity to negate supply-chain headwinds. First-quarter inventory was up to 694.2 million from 650.1 million in the prior-year quarter as it continued to maintain buffer levels for certain components and products.
Cash Flow & Liquidity
In first-quarter 2022, Arista generated $217.1 million of net cash from operating activities compared with $254.7 million in the prior-year period. As of Mar 31, 2022, the cloud networking company had $635 million in cash and cash equivalents with $51.1 million of non-current deferred tax liabilities. Arista repurchased shares worth $136.2 million during the quarter at an average price of $116 per share. The company has so far bought 1.8 million shares for $209 million as part of its $1 billion share repurchase program initiated in October 2021.
Q2 View
Arista is increasingly offering a software-driven, data-centric approach to help customers build their cloud architecture and augment their cloud experience. The company is increasingly gaining market traction in 100-, 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations. Arista expects to witness continued growth within its enterprise vertical in the forthcoming quarters, with customer mix being the key driver. For the second quarter of 2022, it expects revenues of $950-$1,000 million. It anticipates a non-GAAP gross margin of 60-62% and a non-GAAP operating margin of 37-38%.
Viavi delivered a modest earnings surprise of 15.6%, on average, in the trailing four quarters. Earnings estimates for the current year for the stock have moved up 8.2% since May 2021, while that for the next year is up 11.6%. Viavi boasts a comprehensive product portfolio that offers end-to-end network visibility and analytics that help build, test, certify, maintain and optimize complex physical and virtual networks. It expects growth to be driven by the secular demand for 5G wireless, fiber and 3D sensing.
KVH Industries, Inc. (KVHI - Free Report) , a Zacks Rank #2 stock, delivered an earnings surprise of 20%, on average, in the trailing four quarters.
Despite global supply chain disruptions, KVH Industries is driving growth and margin expansion through new product introduction and subscriber migration to High-Throughput Satellites. The company aims to make decisive inroads into the still-nascent autonomous transportation markets with a strong balance sheet and zero debt. If KVH Industries manages to effectively mitigate supply chain woes, there could be room for cash flow expansion.
Spirent Communications plc (SPMYY - Free Report) carries a Zacks Rank #2. Earnings estimates for the current year for the stock have moved up 9.2% since May 2021, while that for the next year is up 10.3%.
Founded in 1936 and headquartered in Crawley, the United Kingdom, Spirent offers a comprehensive, end-to-end solution that validates forwarding performance, latency and functional capabilities in an integrated approach that reduces cost of ownership. It is a leading provider of Ethernet validation solutions in the market.
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Arista (ANET) Beats Q1 Earnings Estimates on Record Revenues
Arista Networks, Inc. (ANET - Free Report) reported strong first-quarter 2022 results, wherein both the bottom and the top lines beat the respective Zacks Consensus Estimate, driven by solid demand trends and healthy customer additions. Adjusted earnings and revenues also improved year over year.
Net Income
On a GAAP basis, net income in the reported quarter improved to $272.3 million or 85 cents per share from $180.4 million or 57 cents per share in the prior-year quarter, primarily driven by top-line growth.
Excluding non-recurring items, non-GAAP net income was $268.5 million or 84 cents per share compared with $198.8 million or 62 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 3 cents.
Arista Networks, Inc. Price, Consensus and EPS Surprise
Arista Networks, Inc. price-consensus-eps-surprise-chart | Arista Networks, Inc. Quote
Revenues
Despite supply chain disruptions, total revenues were record high and soared 31.4% year over year to $877.1 million. The top line surpassed the company’s guidance of $840-$860 million and exceeded the consensus estimate of $854 million. The rise was primarily led by solid customer additions and growth in the enterprise vertical along with accelerated shipments to cloud titan customers that were mostly deferred from the previous quarter.
Arista generated 76% of total quarterly revenues from the Americas and the remainder from international operations. Product revenues increased to $724.7 million from $539.1 million on healthy traction from existing products and ramp up of newer ones with a successful transition from prototype to trials. Service revenues grew to $152.3 million from $128.4 million, supported by renewals and subscriptions. Cloud titans were the largest in terms of the vertical mix, followed by enterprise, specialty cloud providers, financials and service providers. The company maintained its leading position in 100, 200 and 400-gig switching and achieved a solid market control in client to cloud networking domain.
Other Details
Non-GAAP gross profit improved to $560.9 million from $432.1 million for respective margins of 63.9% and 64.7%. The non-GAAP gross margin was at the higher end of the company’s guidance of 63-64%, reflecting healthy software and services mix.
Total operating expenses increased to $275.9 million from $219 million in the prior-year quarter, owing to higher R&D costs, increased variable compensation and other headcount-related charges, partially offset by lower COVID-related travel and marketing expenses. Non-GAAP operating income increased to $335.6 million from $251.3 million in the year-ago quarter, with corresponding margins of 38.3% and 37.6%, respectively.
With improved customer demand and order visibility, the company is taking decisive steps to improve inventory levels and manufacturing capacity to negate supply-chain headwinds. First-quarter inventory was up to 694.2 million from 650.1 million in the prior-year quarter as it continued to maintain buffer levels for certain components and products.
Cash Flow & Liquidity
In first-quarter 2022, Arista generated $217.1 million of net cash from operating activities compared with $254.7 million in the prior-year period. As of Mar 31, 2022, the cloud networking company had $635 million in cash and cash equivalents with $51.1 million of non-current deferred tax liabilities. Arista repurchased shares worth $136.2 million during the quarter at an average price of $116 per share. The company has so far bought 1.8 million shares for $209 million as part of its $1 billion share repurchase program initiated in October 2021.
Q2 View
Arista is increasingly offering a software-driven, data-centric approach to help customers build their cloud architecture and augment their cloud experience. The company is increasingly gaining market traction in 100-, 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations. Arista expects to witness continued growth within its enterprise vertical in the forthcoming quarters, with customer mix being the key driver. For the second quarter of 2022, it expects revenues of $950-$1,000 million. It anticipates a non-GAAP gross margin of 60-62% and a non-GAAP operating margin of 37-38%.
Zacks Rank & Stocks to Consider
Arista currently has a Zacks Rank #3 (Hold).
Viavi Solutions Inc. (VIAV - Free Report) , carrying a Zacks Rank #2 (Buy), is a solid pick for investors. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Viavi delivered a modest earnings surprise of 15.6%, on average, in the trailing four quarters. Earnings estimates for the current year for the stock have moved up 8.2% since May 2021, while that for the next year is up 11.6%. Viavi boasts a comprehensive product portfolio that offers end-to-end network visibility and analytics that help build, test, certify, maintain and optimize complex physical and virtual networks. It expects growth to be driven by the secular demand for 5G wireless, fiber and 3D sensing.
KVH Industries, Inc. (KVHI - Free Report) , a Zacks Rank #2 stock, delivered an earnings surprise of 20%, on average, in the trailing four quarters.
Despite global supply chain disruptions, KVH Industries is driving growth and margin expansion through new product introduction and subscriber migration to High-Throughput Satellites. The company aims to make decisive inroads into the still-nascent autonomous transportation markets with a strong balance sheet and zero debt. If KVH Industries manages to effectively mitigate supply chain woes, there could be room for cash flow expansion.
Spirent Communications plc (SPMYY - Free Report) carries a Zacks Rank #2. Earnings estimates for the current year for the stock have moved up 9.2% since May 2021, while that for the next year is up 10.3%.
Founded in 1936 and headquartered in Crawley, the United Kingdom, Spirent offers a comprehensive, end-to-end solution that validates forwarding performance, latency and functional capabilities in an integrated approach that reduces cost of ownership. It is a leading provider of Ethernet validation solutions in the market.