Will Demand Volatility Affect Arista's (ANET) Q4 Earnings?
Zacks Investment Research | Feb 10, 2020 08:14PM ET
Arista Networks, Inc. (NYSE:ANET) is scheduled to report fourth-quarter 2019 results after the closing bell on Feb 13. In the last reported quarter, the company delivered a positive earnings surprise of 10.3%, surpassing the Zacks Consensus Estimate by 25 cents. In the fourth quarter, the company is likely to have generated lower consolidated revenues on a year-over-year basis, due to volatility in demand from a leading cloud titan.
Factors at Play
During the quarter, Arista installed network platforms for SK Telecom’s 5G network. The company is providing South Korea’s largest wireless carrier with universal spine and leaf network switches, combining routing and switching to reduce complexity and significantly improve scale without compromising performance at speeds of 100 plus Tbps. This is likely to have boosted revenues in the quarter.
Arista also launched CloudEOS – a multi-cloud and cloud-native networking solution – enabling a highly secure and reliable networking experience with consistent segmentation, telemetry, provisioning and troubleshooting for the entire enterprise. This is likely to have generated additional revenues for the company in the fourth quarter.
However, Arista is likely to have witnessed significant volatility in demand from its cloud business, largely driven by a sudden shift in procurement strategy from a key cloud titan. The original order projections might have been markedly lower due to a material reduction in demand. This is expected to have affected its top line in the quarter.
For fourth-quarter 2019, the company projects revenues of $540-$560 million, which is about 8% lower than its prior-year quarter figure. The Zacks Consensus Estimate for the same is pegged at $551 million, indicating a 7.6% decline from the year-ago reported number. The consensus estimate for earnings is currently pegged at $2.09 per share. It reported $2.25 in the year-earlier quarter.
Earnings Whispers
Our proven model does not predict an earnings beat for Arista in the fourth quarter. The combination of a positive Earnings ESP Filter .
Arista Networks, Inc. Price and EPS Surprise
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