Arista Networks, Inc. Q2 FY2022 Earnings Call

· Earnings call transcript and AI-powered summary

Arista Networks Q2 2022 Earnings Summary

Quarter Highlights

  • Revenue of $1.05 billion, up 48.7% year-over-year (compared to Q2 2021).
  • Non-GAAP EPS of $1.08, up approximately 59% from prior year.
  • Non-GAAP gross margin of 61.9%, at the upper end of guidance (affected by supply chain costs and higher cloud titan mix).
  • Service and subscription software revenue contributed 17.6% (down from 19.2% in Q1 due to faster product revenue growth).
  • International revenue was 20%, down from 24% in Q1 due to stronger U.S. cloud titan shipments.
  • Operating income of $425.5 million (40.4% of revenue).
  • Cash and investments totaled $2.9 billion.
  • Share repurchases totaled $483.7 million during the quarter.
  • Operating cash flow of $101.1 million, driven by earnings but offset by increased working capital investments.

Business & Market Commentary

  • Cloud titans remained Arista’s largest vertical, followed by enterprise, cloud specialty providers, and financials.
  • Microsoft and Meta are expected to each represent over 10% of full-year revenue.
  • Arista continued to gain traction with cloud specialty providers and enterprises; million-dollar customer logos have doubled across revenue tiers over the past 3 years.

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Operator: Welcome to the Second Quarter 2022 Arista Networks Financial Results Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded and will be available for replay from the Investor Relations section at the Arista website following this call. Ms. Liz Stine, Arista’s Director of Investor Relations, you may begin. Liz Stine: Thank you, operator. Good afternoon, everyone and thank you for joining us. With me on today’s call are Jayshree Ullal, Arista Networks’ President and Chief Executive Officer; and Ita Brennan, Arista’s Chief Financial Officer. This afternoon, Arista Networks issued a press release announcing the results for its fiscal second quarter ending June 30, 2022. If you would like a copy of the release, you can access it online at our website. During the course of this conference call, Arista Networks management will make forward-looking statements, including those relating to our financial outlook for the third quarter of the 2022 fiscal year, longer term financial outlook for 2022 and beyond, our total addressable market and strategy for addressing these market opportunities, supply chain constraints, component costs, manufacturing capacity, inventory purchases and inflationary pressures on our business, the potential impact of COVID-19, customer mix, product innovation and the benefits of acquisitions, which are subject to the risks and uncertainties that we discuss in detail in our documents filed with the SEC, spec

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