Arista Networks sees fourth-quarter revenue above estimates on steady demand

Audio By Carbonatix

(Reuters) – Arista Networks projected fourth-quarter revenue above Wall Street estimates on Thursday, as the growing foot print of data centers amid an AI boom lifted demand for its networking equipment.

The Santa Clara, California-based company forecast revenue between $1.85 billion and $1.90 billion for the current quarter, compared with analysts’ average estimate of $1.81 billion, according to LSEG data.

Still, shares of the company were down 6% in extended trading, having surged 83% this year on the back of a surge in demand for artificial intelligence technologies.

Companies have ramped up investments in AI technologies which require heavy computing power, creating a spike in demand for data centers, which use Arista’s products such as Ethernet switches and routers.

Arista has said it is benefiting from its enterprise customers refreshing networking systems as they expand data center capacity rapidly.

Peer Juniper Networks last week also topped estimates for quarterly revenue and profit, powered by healthy demand from cloud computing companies.

Arista also said its board has approved a four-for-one stock split to make its common shares accessible to a broader base of investors. Trading on a split-adjusted basis will be effective prior to the market open on Dec. 4.

Arista posted a profit of $747.9 million, or $2.33 per share, for the third quarter ended September, up from $545.3 million, or $1.72 per share, a year earlier. Adjusted earnings of $2.40 per share came in above estimates of $2.08.

Revenue rose 7.1% to $1.81 billion, beating estimates of $1.74 billion.

Its adjusted gross margin of 64.6% slowed down from 65.4% in the second quarter, but rose from the 63.1% a year earlier.

(Reporting by Deborah Sophia in Bengaluru; Editing by Maju Samuel)