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Why Shares of Arista Networks Surged Today

What happened

Shares of networking company Arista Networks (NYSE: ANET) jumped on Friday following a solid fourth-quarter report. Arista beat analyst estimates for both revenue and earnings and provided guidance that was ahead of expectations. The stock was up about 9.5% at 2:30 p.m. EST.

So what

Arista reported fourth-quarter revenue of $595.7 million, up 27.3% year over year and about $4.5 million higher than the average analyst estimate. Product revenue was up 23.6%, to $503.2 million, while service revenue soared 52.4%, to $92.5 million.

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Non-GAAP earnings per share came in at $2.25, up from $1.71 in the prior-year period and $0.19 better than analysts were expecting. Non-GAAP gross margin was 64.1%, down from 65.9% in the prior-year period. This gross margin decline was more than offset by higher revenue.

"We are pleased with our solid 2018 financial performance and continued momentum across cloud titan and enterprise verticals. Arista is earning a strategic role with customers deploying transformative cloud networking," said Arista CEO Jayshree Ullal.

Now what

Arista expects to produce first-quarter revenue between $588 million and $598 million, up 25.5% year over year at the midpoint. Analysts were expecting the company to guide for revenue of $588.1 million. Non-GAAP gross margin is expected to be between 63% and 65%, and non-GAAP operating margin is expected to be about 35%.

While some hardware providers are feeling the impact of weak demand from data-center customers, Arista's strong guidance suggests that it isn't one of them.

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Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Arista Networks. The Motley Fool has a disclosure policy.

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