Arista Networks Stock Falls After Q4 Results Slightly Miss Expectations
Strong Q4 Results
In the fourth quarter of 2023, Arista Networks reported revenue of $1.54 billion, representing a 21% increase compared to the same period the previous year. This figure was towards the higher end of the company’s guidance range of $1.5 billion to $1.55 billion and exceeded the Street consensus estimate. The company also reported a non-GAAP gross margin of 64.9%, surpassing its own forecast of 63%. Adjusted profit for the quarter stood at $2.08 per share, beating the Street consensus of $1.70.
Q1 2024 Guidance
Looking ahead, Arista Networks expects its revenue for the first quarter of 2024 to fall within the range of $1.52 billion to $1.56 billion. The company also provided guidance for a non-GAAP gross margin of 62% and a non-GAAP operating margin of 42%. Market expectations for the quarter had anticipated $1.53 billion in revenue and earnings of $1.66 per share.
Investor Expectations and Key Partnerships
Investor expectations were high going into the quarter, as Arista Networks generates nearly half of its revenue from key partners, Microsoft and Meta. Both companies recently projected increased capital spending in 2024 for AI data centers, which led to heightened expectations for Arista Networks’ performance.
Stock Performance
Prior to the announcement, Arista Networks’ stock had experienced a strong rally, increasing by 19% year to date and more than doubling over the last 12 months. Despite the absence of any apparent flaws in the company’s results or guidance, the stock fell by 5.5% in late trading, closing at $266.57.
In conclusion, while Arista Networks’ fourth-quarter results were solid and exceeded expectations, investors were left wanting more. The company’s strong performance and key partnerships position it well for the future, but it remains to be seen how it can meet the heightened expectations of the market.
Analyst comment
Negative news.
As an analyst, the market may experience some short-term volatility as investors may be disappointed with the stock’s decline. However, Arista Networks’ strong performance and key partnerships indicate a positive outlook. The company’s ability to meet heightened expectations will determine its future success.
