Arista Networks' lukewarm Q1 forecast overshadows profit beat

Juniper Networks

12/02/2024 23:31

By Zaheer Kachwala
       Feb 12 (Reuters) - Cloud networking solutions provider
Arista Networks  ANET.N  forecast current-quarter adjusted gross
margin below market expectations on Monday, overshadowing its
quarterly profit beat and sending its shares down around 6% in
extended trading.
    Higher operating costs and expansion have weighed on its
margins, even as sales have remained strong due to resilient
demand for its networking gear from clients including Microsoft
 MSFT.O  and Meta Platforms  META.O , as they grow their cloud
infrastructure to support artificial intelligence needs.
    Operating expenses for Arista in the fourth quarter ended
Dec. 31 widened to $359.3 million from $299.7 million a year
earlier.
    Last month, peer Juniper Networks reported downbeat revenue
on lower client spending for its cloud computing and network
security services.
    Arista on Monday forecast first-quarter adjusted gross
margin of about 62%, below analysts' expectation of 62.7%,
according to LSEG estimates. In comparison, it reported a margin
of 65.4% in the fourth quarter.          
    "The knee-jerk after-market reaction is not favorable to a
lower gross margin projection," Michael Ashley Schulman, chief
investment officer at Running Point Capital, said, adding "the
profit beat doesn't seem strong enough to push shares higher".
    Arista's revenue for the fourth quarter rose 20.8% to $1.54
billion, above analysts' average estimate of $1.53 billion.
    On an adjusted basis, the company earned $2.08 per share,
compared with estimates of a profit of $1.70.
    It forecast first-quarter revenue in the range of $1.52
billion to $1.56 billion, largely above analysts' estimate of
$1.53 billion.

 (Reporting by Zaheer Kachwala in Bengaluru; Editing by Shinjini
Ganguli)
 ((Zaheer.Kachwala@thomsonreuters.com;))