Arista Networks (ANET) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue reached $1.81 billion, up 20% year-over-year, with record non-GAAP EPS of $2.40 and strong contributions from services and software support renewals at 17.6% of revenue.

• Net income for Q3 2024 was $747.9 million, a 37% increase year-over-year, with diluted EPS of $2.33.

• Non-GAAP gross margin was 64.6%, influenced by Cloud Titan pricing and favorable enterprise margin; international revenue was 18% of total.

• AI networking and campus segments are driving growth, with accelerated adoption, expanded product portfolio, and notable collaborations, including Meta and the launch of the 7700R4 Distributed Etherlink platform.

• Board approved a four-for-one forward stock split effective December 2024 to enhance accessibility and trading dynamics.

Financial highlights

• Operating income was $890.1 million (49.1% of revenue), net income $769.1 million (42.5% of revenue), and diluted EPS $2.40, up 31.1% year-over-year.

• Product revenue rose 18.5% year-over-year to $1.52 billion; service revenue increased 28.2% to $287.1 million.

• Cash, cash equivalents, and investments totaled $7.4 billion as of September 30, 2024.

• Cash flow from operations for the nine months ended September 30, 2024 was $2.68 billion.

• $65.2 million in stock repurchases during Q3; $1 billion remains under the current program.

Outlook and guidance

• Q4 2024 guidance: revenue of $1.85–$1.9 billion, gross margin 63%–64%, operating margin ~44%, effective tax rate ~21.5%.

• 2025 revenue projected at ~$8 billion, with 15%–17% annual growth, gross margin 60%–62%, and operating margin 43%–44%.

• Double-digit growth and mid-teens three-year CAGR expected for 2024–2026.

• Management expects continued volatility in revenue and inventory due to customer order patterns and new product introductions.

• Increased working capital and inventory in Q4 to support rapid AI network deployment.