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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

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