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Arista: Sales up, profit up, share price down

Stock-jocks disappointed that 40 per cent growth won't last

Arista has turned in just over 40 per cent growth for Q1 2018 over the same quarter last year, recording US$472.5 million revenue for the quarter.

Arista's president and CEO Jayshree Ullal said the move to 100 Gbps Ethernet is “not yet in the first innings” (think baseball or cricket), and expects that shift will give it a chance to keep things moving through the remainder of 2018.

Even so, it would be remarkable for any company to keep piling on growth at a 40 per cent rate. Arista's forecast for the remainder of the year is for growth “in the mid twenties” Ullal, resulting in its stock falling 8.5 per cent after the announcement to around $245.

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That gives Arista good reason to look to 100 Gbps in the longer term. Ullal said the technology will permeate the cloud, moving 25 G and 50 G back into the storage networks, and “the arrival of 400 G next year will make us stronger in 100 G”.

That's tempered with more competition and more volume in the cloud segment, which is pushing lower prices and lower gross margins.

She also said the company is picking up business in its router segment, and is expecting to double the number of customers by the end of 2018 compared to the end of 2017.

The company reported GAAP net income for the quarter of $144.9m, compared to $83m for Q1 in 2017.

Arista added that it's set aside $6m to tie up remaining litigation with Cisco and OptumSoft (the legal expenses are excluded from its guidance).

Ullal said the progress of Arista's litigation with Cisco meant it's no longer experiencing customer certification delays, and in terms of customer implementations, “we pretty much expect to return to normalcy in the second half of 2018”.

The case with OptumSoft involves a spat with an Arista co-founder, David Cheriton, over some components of the EOS operating system. ®

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