The sharp drop in operating cash flow in Q4 2022 was primarily driven by **increased working capital requirements**. Specifically, the company experienced a **growth in inventory** due to the receipt of components for future shipments (including shipments delayed because of supplier decommits) and an **increase in accounts receivable** along with longer **days sales outstanding (DSOs)** because of a significant ramp in service renewals and product shipments towards the end of the quarter. Although the company delivered strong earnings performance, these factors collectively resulted in cash generated from operations being substantially offset.  **[ANET_3227961_5]** 

What contributed to the sharp drop in operating cash flow in Q4 2022?

Arista Networks' operating cash flow almost halved from **$1,015,856 thousand in FY 2021** to **$492,813 thousand in FY 2022** primarily due to a substantial increase in working capital requirements. In FY 2022, the company experienced a **net increase of $912.8 million in working capital**, driven by a **$638.9 million increase in inventory**, a **$401.5 million increase in accounts receivable**, and an **$85.2 million rise in prepaid and other current assets**. These cash outflows were only partially offset by increases in deferred revenue, accounts payable, and other factors including lower non-cash adjustments compared to FY 2021, which together led to the significant reduction in cash flow.  **[0001596532-23-000016_anet-20221231.htm:96]** 

Why did the annual operating cash flow almost halve from FY 2021 to FY 2022?

The significant surge in operating cash flow in Q3 2023 was driven by a combination of factors. **Higher net income**—which increased substantially in 2023—combined with beneficial changes in working capital, notably higher **income tax payables**, increased **deferred revenue**, and improved **accounts receivable** collections, played a key role. Additionally, increased **non-cash adjustments** such as higher **stock-based compensation** and **depreciation and amortization** contributed to the surge, although these were partially offset by larger increases in inventory and other assets.  **[0001596532-23-000272_ex991q323-earningsrelease.htm:7]** **[0001596532-23-000274_anet-20230930.htm:4]** **[0001596532-23-000274_anet-20230930.htm:29]** 

What drove the significant surge in operating cash flow in Q3 2023?

3f91ca4dfd20bb7c83907865e4e2e696abe576a1248a4cbd32b69f676d6f2f7b

The sharp increase in cash in Q3 2024 was primarily driven by a **substantial boost in cash provided by operating activities**, which increased to **$2,677,272 thousand** during the nine months ended September 30, 2024, compared to **$1,507,550 thousand** in the same period in 2023. Despite higher cash usage in investing (**$1,147,413 thousand** vs. **$350,497 thousand**) and financing activities (**$291,774 thousand** vs. **$82,421 thousand**), the significant rise in operating cash flows was the main contributor to the overall increase in cash and cash equivalents.  **[0001596532-24-000368_anet-20240930.htm:28]** 

What contributed to the sharp increase in cash in Q3 2024?

The significant rise in total assets in Q3 2024 was driven by several factors. **Cash and cash equivalents** increased from **$1,938,606** thousand to **$3,175,139** thousand, **marketable securities** rose from **$3,069,362** thousand to **$4,253,249** thousand, **accounts receivable, net** grew from **$1,034,398** thousand to **$1,130,897** thousand, **deferred tax assets** increased from **$945,792** thousand to **$1,318,224** thousand, and **other assets** went up from **$151,900** thousand to **$220,295** thousand.  **[0001596532-24-000366_ex991q324-earningsrelease.htm:7]** 

What drove the significant rise in total assets in Q3 2024?

The sharp jump in liabilities in Q3 2024 was primarily driven by a significant increase in **deferred revenue**. Specifically, **current deferred revenue** increased by **$684,386 thousand** and **non-current deferred revenue** increased by **$316,741 thousand**, with the overall deferred revenue surge being the most substantial contributor. Although there were minor offsets—such as a decrease in **accounts payable** by **$145,898 thousand** and an increase in **other current liabilities**—the major factor was the higher unearned revenue from multi-year post-contract support contracts and other services.  **[0001596532-24-000366_ex991q324-earningsrelease.htm:7]** **[0001596532-24-000368_anet-20240930.htm:11]** 

Why did liabilities jump so sharply in Q3 2024?

The jump in **marketable securities** in Q3 2024 was driven by several key factors. There was an **increase in purchases of marketable securities** (from **$1,934,156** in Q3 2023 to **$2,593,418** in Q3 2024), while the **proceeds from maturities and sales** (totaling **$1,472,213**) were lower than these purchases, resulting in a net increase. In addition, there was a deliberate **shift in asset allocation** by moving cash into marketable securities, and the company maintained a **focus on short-term, highly-rated investments** to minimize risk while ensuring liquidity.  **[0001596532-24-000368_anet-20240930.htm:4]** 

What factors led to the jump in marketable securities in Q3 2024?

0d0b9a6b985e216ec591060e269c3d0bc79fab81289d3535a09a7f8a70f2427f

The jump in Service Revenue in Q3 2023 was primarily driven by **continued growth in initial and renewal support contracts** as the company's customer installed base expanded, which led to an increase of **$55.8 million (33.2%)** compared to the same period in 2022. Additionally, factors such as customers consuming services faster than intended and the signing of renewal contracts that included prior periods contributed to the spike in the services line.  **[0001596532-23-000274_anet-20230930.htm:24]** **[ANET_3362807_7]** 

What drove the jump in Service Revenue in Q3 2023?

The **increase in Net Income in Q3 2023** was driven by several factors. **Revenue grew significantly**, with a **28.3% increase** in total revenue that benefited both **product sales (up 27.4%)** and **services (up 33.2%)**.  **[0001596532-23-000272_ex991q323-earningsrelease.htm:0]** **[0001596532-23-000274_anet-20230930.htm:24]** **[0001596532-23-000274_anet-20230930.htm:2]**  Additionally, **gross margins improved**—the GAAP gross margin rose from **60.3% to 62.4%** and the non-GAAP margin also increased, reflecting better supply chain management and higher enterprise shipments.  **[0001596532-23-000272_ex991q323-earningsrelease.htm:0]** **[ANET_3362807_3]**  Furthermore, **other income grew substantially** (rising from **$6,817 thousand** to **$41,815 thousand**), and careful **operating expense management** along with a relatively **stable tax rate of 21.3%** helped convert the revenue gains into a significantly higher net income.  **[0001596532-23-000274_anet-20230930.htm:2]** **[ANET_3362807_3]** 

What factors contributed to the increase in Net Income in Q3 2023?

The significant increase in the Q2 2023 tax provision was primarily driven by a **substantial rise in income before income taxes**, which increased from **$362,320 thousand** in Q2 2022 to **$586,401 thousand** in Q2 2023—an increase of **$224,081 thousand** or **61.8%**.  **[0001596532-23-000197_anet-20230630.htm:26]**  Although the **effective tax rate decreased** from **17.4%** to **16.1%** due to higher tax benefits from stock-based compensation  **[0001596532-23-000197_anet-20230630.htm:17]** **[0001596532-23-000197_anet-20230630.htm:26]** , the major factor behind the higher tax provision was the increased pre-tax income.

Why did the tax provision rise significantly in Q2 2023?

The increase in R&D expenses in Q2 2023 was driven by two key factors. **Headcount growth** led to an increase of **$27.6 million** in personnel costs, while **new product introduction costs** added an extra **$24.4 million** for non-recurring engineering and prototype development efforts. These investments supported the expansion of Arista's cloud networking platform and its product portfolio.  **[0001596532-23-000197_anet-20230630.htm:25]** **[0001596532-23-000197_anet-20230630.htm:24]** 

What drove the increase in R&D expenses in Q2 2023?

In Q3 2023, the improvement in EPS was driven by several factors. The company experienced a **28.3% increase in total revenue** (rising from **$1.177 billion** to **$1.509 billion**) due to strong performance in both product and service revenues, with a **27.4% increase in product revenue** and a **33.2% increase in service revenue**.  **[0001596532-23-000272_ex991q323-earningsrelease.htm:0]** **[0001596532-23-000274_anet-20230930.htm:24]**  At the same time, the gross margin improved from **60.3%** to **62.4%**, reflecting better supply chain costs and enhanced contributions from enterprise customers.  **[0001596532-23-000272_ex991q323-earningsrelease.htm:0]** **[0001596532-23-000274_anet-20230930.htm:24]**  Additionally, operating expenses as a percentage of revenue declined, boosting overall profitability.  **[ANET_3362807_3]**  These factors, combined with a **54% increase in net income** (from **$354.0 million** to **$545.3 million**) and a stable share count, together amplified the basic EPS, leading to its significant rise.  **[0001596532-23-000272_ex991q323-earningsrelease.htm:0]** **[0001596532-23-000274_anet-20230930.htm:18]** 

What led to the improvement in EPS in Q3 2023?

a1e0cfd8b0e50d5f5cb5bcbc8732f4c44831996cd90ed2bc8be2480306c7b0b4

Cash and cash equivalents (USD, thousands)

Marketable securities (USD, thousands)

Accounts receivable, net (USD, thousands)

Inventories (USD, thousands)

Prepaid expenses and other current assets (USD, thousands)

Total current assets (USD, thousands)

Property and equipment, net (USD, thousands)

Goodwill and acquisition-related intangible assets, net (USD, thousands)

Deferred tax assets (USD, thousands)

Other assets (USD, thousands)

TOTAL ASSETS (USD, thousands)

Accounts payable (USD, thousands)

Accrued liabilities (USD, thousands)

Deferred revenue (USD, thousands)

Other current liabilities (USD, thousands)

Total current liabilities (USD, thousands)

Income taxes payable (USD, thousands)

Deferred revenue, non-current (USD, thousands)

Other long-term liabilities (USD, thousands)

TOTAL LIABILITIES (USD, thousands)

Common stock (USD, thousands)

Additional paid-in capital (USD, thousands)

Retained earnings (USD, thousands)

Accumulated other comprehensive income (loss) (USD, thousands)

TOTAL STOCKHOLDERS’ EQUITY (USD, thousands)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (USD, thousands)

742f8235f777a2abc08079f58e7893a90600748966f6012aeaa22dd11a277a67

Revenue: Product (USD, thousands)

Revenue: Service (USD, thousands)

Total Revenue (USD, thousands)

Cost of Revenue: Product (USD, thousands)

Cost of Revenue: Service (USD, thousands)

Total Cost of Revenue (USD, thousands)

Gross Profit (USD, thousands)

Operating Expenses: Research and Development (USD, thousands)

Operating Expenses: Sales and Marketing (USD, thousands)

Operating Expenses: General and Administrative (USD, thousands)

Total Operating Expenses (USD, thousands)

Income from Operations (USD, thousands)

Other Income (Expense), Net (USD, thousands)

Income Before Income Taxes (USD, thousands)

Provision for Income Taxes (USD, thousands)

Net Income (USD, thousands)

Net Income Per Share: Basic (USD)

Net Income Per Share: Diluted (USD)

Weighted-Average Shares Used in Computing Net Income Per Share: Basic (Shares)

Weighted-Average Shares Used in Computing Net Income Per Share: Diluted (Shares)

70e36bced108ef1128a5d8ed9f7ae097705cdf7f7a8e9c8408d9dfce7a17f0ec

Net income [USD, thousands]

Depreciation, amortization and other [USD, thousands]

Stock-based compensation [USD, thousands]

Income taxes, net [USD, thousands]

Net cash provided by operating activities [USD, thousands]

Proceeds from maturities of marketable securities [USD, thousands]

Proceeds from sale of marketable securities [USD, thousands]

Purchases of marketable securities [USD, thousands]

Purchases of property and equipment [USD, thousands]

Net cash provided by (used in) investing activities [USD, thousands]

Proceeds from issuance of common stock under equity plans [USD, thousands]

Tax withholding paid on behalf of employees for net share settlement [USD, thousands]

Repurchases of common stock [USD, thousands]

Net cash used in financing activities [USD, thousands]

Effect of exchange rate changes [USD, thousands]

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH [USD, thousands]

Deferred income taxes [USD, thousands]

Accounts receivable, net [USD, thousands]

Inventories [USD, thousands]

Other assets [USD, thousands]

Accounts payable [USD, thousands]

Deferred revenue [USD, thousands]

Other liabilities [USD, thousands]

CASH, CASH EQUIVALENTS AND RESTRICTED CASH —Beginning of period [USD, thousands]

CASH, CASH EQUIVALENTS AND RESTRICTED CASH —End of period [USD, thousands]

17d13e9be24aab82d5c36441b380d3a1f616943428d862627eb463430815c64c

ec4d706d69fa091ed18d9b069de3feec2ab055c687ceacf35b75ad623a70569b

a469692bd4eb5f05d65fec897d8d14684d4c719bb4ff25da94b72895011c084d

Adjustments for Non-Cash Items [USD, Millions]

daa87f2a8ea5edb0874a3263ddada60c1d18c26a2fa2dd95874a12902b955cad

Total revenue from remaining performance obligations (USD billions)

Other performance obligations (USD millions)

fbe1801a72049129476d4716f24d6c4596802899ec4a729aaa0a14cf2126b116

Americas

- United States

- Other Americas

Europe, Middle East, and Africa

Asia-Pacific

Total Revenue

325b7e5a6c24c6ed88e86782abc38d9835d959d48350be03fb390adda75dfb78

Product

Service

ea80e60444a905ebfdc50ddd3453b994af5d20410cddd04ebd20b560c21baa17

Arista Networks (ANET)

Financials