Arista Networks reported third-quarter earnings and revenue that topped analyst estimates amid investor angst over 2024 capital spending plans of key customers. ANET stock popped on Tuesday as Oracle emerged as a new customer.
The maker of cloud computing network gear reported its results after the market close on Monday.
For the three months ended Sept. 30, Arista earnings popped 46% to $1.83 per share. Also, revenue jumped 28% to $1.51 billion.
Analysts estimated EPS of $1.58 on revenue of $1.48 billion. A year earlier, Arista earnings were $1.25 a share on revenue of $1.18 billion.
Sales Guidance For ANET Stock
For the current quarter ending Dec. 31, Arista predicted revenue in a range of $1.50 billion to $1.55 billion, topping estimates of $1.47 billion.
"Share gains in enterprise data center, campus networking, and cloud networking are driving upside," said Barclays analyst Tim Long in a report. "Margins continue to improve on better component pricing and operating leverage."
On the stock market today, ANET stock surged 14% to close at 200.37.
Also, Arista's biggest customers are Microsoft and Facebook-parent Meta Platforms. Arista stock fell last week after Meta reported Q3 earnings and gave initial guidance on 2024 capital spending.
Based on management commentary, Jefferies analyst George Notter estimates that Oracle now accounts for 5% of sales. Analysts also expect Arista to win more orders from Google-parent Alphabet.
Artificial Intelligence Upside Expected
Heading into the earnings report, ANET stock had advanced nearly 45% in 2023.
Arista sells computer network switches that speed up communications in internet data centers. Further, its chief rivals are Cisco Systems and Juniper Networks.
According to analysts, Arista is gaining ground in the so-called "enterprise" market — large companies, government agencies and educational institutions.
"Notably, ANET is seeing strength among traditional high-tech and financial customers as well as newer verticals such as health care and
education," said Goldman Sachs analyst Michael Ng in a report.
By 2025, some analysts expect ANET stock to get a boost from customer investments in artificial intelligence infrastructure. Internet data centers will need more computing power and network bandwidth to process AI workloads.
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