Including a price move based on just a few minutes is asinine, but this link says -6%.
Arista beats by $0.15, beats on revenue https://seekingalpha.com/news/3352415?source=ansh $ANET
Top end of revenue guidance for next Q is 27%, thus the precipitous price reaction.
A.J.
Forward guidance from the midpoint however is only 25%, as they guided last quarter, which most thought may have been being very conservative. Turns out they were not kidding. Sure, sure, they may beat it, but that is still quite the slow down in growth when they are supposedly in the peak of their dominance as 100gb is here.
On to the earnings conference call I guess to get more details.
Tinker
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from what I can gather so far, they see revenue of 500 mill to 514 mill which is just above the consensus for 505 mill with gross profit margin between 62-64%. Think this is why they are down about 7.5% as I write this. Market expecting a lot more…so what else is news> Some strange things going on these days. More later.
Market expecting a lot more…so what else is news> Some strange things going on these days. More later.
Branmin:
Nothing really strange about this…they have a rapidly decelerating revenue growth in a rather short period…this in a richly valued stock with a P/S of 12 and PE 50 whose stock has doubled in trailing 12 months.
No deceleration allowed!
In comparison to CSCO or JNPR…the companies…still great earnings…but ANET, the stock, is more richly valued.
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Just a slight reality check here. Last year the guidance they gave for Q2 (in the Q1 release) was for a 33% revenue increase YoY. They actually achieved 51%.
Bear
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Bear, I understand how they vastly exceeded guidance last year. However, 33% growth was not going to derail the stock last year. This year, and they full know it, 25% growth will derail the stock. Given this I doubt Arista would guide so low without good reason. There is nothing to be gained by sandbagging it this quarter.
They said it last quarter, and they are sticking with it this quarter, as they get more visibility. They said they did not have enough visibility last quarter and thus went to the 25% default guidance. Well, now they have visibility and they stuck with it knowing it would hit the stock.
Tinker
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Revenue of $472.5 million, an increase of 1.0% compared to the fourth quarter of 2017, and an increase of 40.8% from the first quarter of 2017.
I understand that first two quarters are usually slow, But 1% Q over Q?
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Duma, think you miss understood or more likely I didn’t make myself clear. Generally the market is punishing(some if not most of our) companies just after earnings are announced and yet give it a few days or in the case of shop, 24 hours later when they have had time to either understand or digest the material, prices reflect another story.
Discl. long Anet. looking ahead 3-5 years as with Shop and Sq.
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Duma, think you miss understood or more likely I didn’t make myself clear. Generally the market is punishing(some if not most of our) companies just after earnings are announced and yet give it a few days or in the case of shop, 24 hours later when they have had time to either understand or digest the material, prices reflect another story
Anything is possible…but I wouldn’t take that bet on ANET.
SHOP is NOT guiding a massive deceleration of revenue growth…ANET has.
High flyers can only stay high flyers when they don’t disappoint us…what is the massive driver that would surprise us to the upside for ANET because right now 100G is already out there and just slogging it out. 400G is not in demand by the marketplace so that may be 2-3 years out.
Can you explain why the market has this so wrong?
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Duma,
This revenue slow down, with tough comparables sure, sure, is coming at a time when companies with extremely difficult comparables, such as Amazon, Azure and Microsoft, and the cloud titans in general are reporting utterly amazing earnings, against difficult comparables, andat revenus rates in the multiple billion of dollars per quarter.
Arista is not sharing so much in that growth then. Before Arista was growing faster than the titans, now they are growing slower than the titans. Enterprise is not making up the gap.
I always tend to talk from my first impression, but will let things sink in over night, but what I believe was our worse fears, that Arista actually meant 25% growth, and was not sand bagging, has occurred and there is no reason to think Arista is sandbagging.
Particularly with everything else going on around Arista that should create the perfect storm fo them growth wise.
Tinker
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https://finance.yahoo.com/news/arista-investors-really-scare…
One needs to look towards the future if one believes.
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I sold ANET a few days ago and put the money into Okta and PSTG.
I was Long anet from 90-150 and 200-263.
Growing at 20 or 25% is good if the stock is priced that way. Unless they are able to continue to beat guidance considerably (remains to be seen) we may see a continuing multiple compression. Hence I am out for awhile at least . Too many stocks that look better to me on this board
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Bought in pre earnings yesterday so the drop came as a surprise.
I sold out of cognex at a loss to buy arista.
When my network guys says that arista makes the coolest network gear, i bellive him. I am not worried at this point 
I just read the CC transcript. I highly recommend it. It is long and there is a lot of great informative Q&A. Seeking Alpha lets you quote up to 400 words but that’s insufficient as there is too much to cover even if one summarizes.
If you only had a little time, I’d read the Q&A from the following 5 analysts:
Jeffrey Thomas Kvaal - what’s up with the cloud titans?
“networking is still a very small piece of their CapEx”
Mark Moskowitz - how far are we along in the 100g cycle?
“1st-2nd inning”
Paul Silverstein - what’s up with white box?
“white box adoption, or rather disaggregated EOS, I’m not seeing any shift or change”
Steven Milunovich - how sticky are the cloud titans?
“It’s a very strong stickiness with these customers, but again tied to the operating system and their automation stack, not just the hardware.”
Tal Liani - what’s up with the 25% growth projections?
“I’ll ask a question and you’ll yell at me like the tesla coil and I’m going to be famous after that. So, I’ll ask the question.”
I did not get an epiphany (buy/sell/hold) from reading these, but I feel better educated for certain. I’m tempted to sell some because I think the market may react poorly to this over the next few (3?) days.
The Q from Tal got me looking at my chart a bit - ANET for the past 3 years has always had 33-43% growth, except for Q2-Q3 of 2017, which were both 51%. Is this just as simple as tough comps for 2 quarters? If Q2-Q3 last year had 40% growth, would we be looking at 35% growth for the next 2 quarters instead of 25%? I don’t know if that line of thinking is helpful but that’s where my brain goes. I suppose it’s irrelevant because ANET is priced with those 2 beautiful quarters already in the books.
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Bear, I understand how they vastly exceeded guidance last year. However, 33% growth was not going to derail the stock last year. This year, and they full know it, 25% growth will derail the stock. Given this I doubt Arista would guide so low without good reason. There is nothing to be gained by sandbagging it this quarter.
They said it last quarter, and they are sticking with it this quarter, as they get more visibility. They said they did not have enough visibility last quarter and thus went to the 25% default guidance. Well, now they have visibility and they stuck with it knowing it would hit the stock.
Tinker,
I think your point is fundamental. They are running a business. They are not trying to influence a stock price.
I have another reality check for everyone…another little tidbit everyone seems to have missed:
For Q2 2017, their guidance for Operating Margin was 28%
For Q2 2018, their guidance for Operating Margin was 32% - 34%
So on top of what we all know will actually be well more than 25% revenue growth, they’re sporting some major margin improvement. In my opinion, you can go ahead and put them down for 30%+ revenue growth and $2+ EPS in the June quarter. I purchased shares and options today. I can’t believe we’re seeing ANET at a PE of 38, but I love it.
Najdorf said (and I appreciated his clear, reasoned post) that If ANET could promise us all 25% growth and flat margins for the next 5 years I would buy at this price. That would be cheap for sure. I think they will grow faster than that for some time – maybe a couple years, maybe more. It may not seem like it now, but I believe at some point (whether with 100G or 400G or some other random event) we’ll see 40%+ or even 50%+ growth. They’ve got a lot of revenue to take away from Cisco before all is said and done.
Think about what really might have changed in the last few months. Do you believe Cisco has suddenly caught Arista? If not…if you believe Arista is still best in class and that hasn’t changed in the last 90 days, I suggest you take a hard look at today’s share price. It may not last long.
Bear
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They said they did not have enough visibility last quarter and thus went to the 25% default guidance. Well, now they have visibility and they stuck with it knowing it would hit the stock.
Last quarter Jalal said with respect to guidance, “hope is not a plan” or words to that effect. I don’t know what makes you so confident that their crystal ball has clarified and reveals the future to a much greater extent today. If you have specific information regarding the specifics for the capex of their customers it would be revealing.
In the great big enterprise where I spent 30 years in IT (about 10 of those years in management) budget allocations by department got sorted out in Q1. Sustaining and maintenance always got dedicated funds before anything else. Development money and capex got rough allocations in Q2. Specific purchase decisions usually didn’t come until end Q2 with POs getting released around that time or even into Q3.
Maybe not true everywhere. I was in an IT shop at an aerospace firm, we didn’t sell computing capacity so maybe not an indication of Arista’s biggest customers’ internal process. But we did spend a lot of money on IT.
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