Cloud Drives Arista to Billion-Dollar Run Rate

And speaking of clouds: Arista is confident it can continue business as usual despite the cloud of Cisco litigation hanging over it.

Mitch Wagner, Executive Editor, Light Reading

August 4, 2016

2 Min Read
Cloud Drives Arista to Billion-Dollar Run Rate

Arista reported quarterly revenue of $268.7 million and income of $53.7 million on Thursday, with growth driven by improved demand from cloud builders for its networking products. The quarter's revenues put Arista on a billion-dollar run rate, CEO Jayshree Ullal noted.

Revenue was up 37% year-over-year for the quarter ending June 30, and the net income was $0.74 per share, up year-over-year from $38.8 million and $0.54 per diluted share. (See Arista 2Q Revenue Hits $268.7M, Income Up.)

For the third quarter, Arista Networks Inc. expects revenue between $279 million and $285 million, gross margin between 62% and 65%, and operating margin of about 26%. Projections exclude $11 million in expenses from litigation with OptumSoft -- led by Arista co-founder David Cheriton -- and Cisco Systems Inc. (Nasdaq: CSCO). The projections also exclude stock-based compensation and other non-recurring expenses. (See Arista Ready With 'Design-Arounds' Following Import Ban Recommendation.)

While the OptumSoft suit is resolved, the Cisco litigation is ongoing and messy. Cisco is charging Arista with infringing on Cisco's intellectual property, and recently won a decision that blocks Arista from importing infringing components to the US. Because Arista gets many of its components from overseas, that decision could be crippling. But Arista is confident it's implemented a workaround that will allow business to continue unabated, pending approval from US customs, company officials said on Thursday's earnings call.

Arista's strongest customer sector is the vertical Arista calls "cloud titans." That's been true historically, and that continued in the second quarter, although its other three sectors -- financial services, service providers, and web and tech enterprises are also strong, Ullal said on an earnings call Thursday afternoon.

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— Mitch Wagner, Follow me on TwitterVisit my LinkedIn profile, Editor, Light Reading Enterprise Cloud

About the Author(s)

Mitch Wagner

Executive Editor, Light Reading

San Diego-based Mitch Wagner is many things. As well as being "our guy" on the West Coast (of the US, not Scotland, or anywhere else with indifferent meteorological conditions), he's a husband (to his wife), dissatisfied Democrat, American (so he could be President some day), nonobservant Jew, and science fiction fan. Not necessarily in that order.

He's also one half of a special duo, along with Minnie, who is the co-habitor of the West Coast Bureau and Light Reading's primary chewer of sticks, though she is not the only one on the team who regularly munches on bark.

Wagner, whose previous positions include Editor-in-Chief at Internet Evolution and Executive Editor at InformationWeek, will be responsible for tracking and reporting on developments in Silicon Valley and other US West Coast hotspots of communications technology innovation.

Beats: Software-defined networking (SDN), network functions virtualization (NFV), IP networking, and colored foods (such as 'green rice').

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