Seeking Alpha

Arista +9.4% on Q2 beat, guidance, VMware partnership

  • In addition to trouncing Q2 estimates, Arista (NYSE:ANET) is guiding for Q3 revenue of $142M-$150M, well above a $133.9M consensus.
  • The data center switch vendor's gross margin rose 320 bps Y/Y in Q2 to 67.9%. GM is expected to fall to 64%-66% in Q3.
  • GAAP opex (boosted by a $4.7M increase in stock compensation expense) rose 67% to $62.7M. One customer (likely Microsoft) made up over 10% of sales.
  • On the CC, Arista disclosed a partnership with VMware (NYSE:VMW) that covers the latter's virtualization and cloud management offerings, and (notably) also its NSX networking virtualization/SDN platform.
  • Arista and VMware have a common rival in Cisco, which towers over the data center switch market and is trying to counter NSX with its ACI/Insieme networking virtualization platform.
  • Whereas NSX is meant to manage 3rd-party switches, ACI is focused on controlling Cisco gear. Cisco argues its hardware/software integration yields better network and app visibility; critics argue it yields higher costs and more complexity.
  • VMware recently stated NSX is now on a $100M+/year run rate. Other partners include Juniper, Dell, and H-P.

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