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Can Healthy Top-Line Growth Aid Arista (ANET) Q3 Earnings?

Zacks Equity Research
·4-min read

Arista Networks, Inc. ANET is scheduled to report third-quarter 2021 results on Nov 1, after the closing bell. In the last reported quarter, the company delivered an earnings surprise of 6.7% with the bottom line surpassing the Zacks Consensus Estimate by 17 cents. The Santa Clara, CA-based cloud networking company is likely to have recorded higher revenues year over year, supported by overall healthy demand. However, Arista is likely to have experienced some supply-chain disruptions due to COVID-19 adversities, resulting in extended lead time and constrained shipments. This, in turn, is likely to have affected the profitability in the quarter.

Factors at Play

During the third quarter, Arista augmented its cloud-grade routing solutions to the next-generation network edge to better equip its portfolio according to the evolving market conditions. The new capabilities for virtual private networking and traffic engineering will enable multi cloud, metro, and 5G RAN-based applications and will likely disrupt the service provider network ecosystem. The portfolio enhancements will facilitate the migration from legacy routers to software-driven architectures for faster time to revenue and lower operating expenses. These capabilities are likely to have translated into incremental revenues in the quarter.

Arista’s EOS (Extensible Operating System) offers all the attributes for the next level of cloud-grade routing solutions. The multi-cloud edge delivers services closer to the end customer with 100G/400G directly connecting to the cloud for uninterrupted service that scales globally. Metro edge designs are equipped with high-density merchant silicon-based 100G/400G routing platforms that offer faster and scalable service delivery to meet the surging bandwidth demand. A 5G edge architecture will help to meet the burgeoning data demand from distributed nodes and radically scaled user/device and traffic profiles. Incremental contributions from all these solutions are likely to be reflected in the upcoming results.

During the to-be-reported quarter, Arista was selected by the Australian Securities Exchange to build a next-generation cognitive campus networking environment. The network will be built using the Arista 720XP series switching platform and will leverage CloudVision software for network management and workflow automation with a real-time view for network monitoring across all devices. This is likely to have contributed to top-line growth in the quarter.

Management expects to have witnessed continued growth within Enterprise customers with strength in adjacencies, software, and services. For the third quarter of 2021, Arista expects revenues of $725-$745 million. The Zacks Consensus Estimate is pegged at $737 million, indicating a 21.8% improvement from the year-ago quarter’s reported figure. Third-quarter earnings are pegged at $2.73 per share, which suggests an improvement from $2.42 recorded in the year-earlier quarter.

Earnings Whispers

Our proven model does not predict an earnings beat for Arista this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.29%, with the former pegged at $2.72 and the latter at $2.73. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Arista Networks, Inc. Price and EPS Surprise

Arista Networks, Inc. Price and EPS Surprise
Arista Networks, Inc. Price and EPS Surprise

Arista Networks, Inc. price-eps-surprise | Arista Networks, Inc. Quote

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Zacks Rank: Arista currently has a Zacks Rank #3.

Stocks to Consider

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:

Qualcomm Incorporated QCOM is set to release quarterly numbers on Nov 3. It has an Earnings ESP of +0.35% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for CommScope Holding Company, Inc. COMM is +7.89% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Nov 4.

The Earnings ESP for T-Mobile US Inc. TMUS is +9.66% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Nov 2.


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QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report

TMobile US, Inc. (TMUS) : Free Stock Analysis Report

CommScope Holding Company, Inc. (COMM) : Free Stock Analysis Report

Arista Networks, Inc. (ANET) : Free Stock Analysis Report

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Zacks Investment Research