Arista Networks (ANET) shares tumbled in extended trading Thursday after the cybersecurity company reported shrinking margins despite profits that exceeded Wall Street expectations.
The cloud networking giant saw revenue grow 7% year over year to $1.81 billion, above Visible Alpha’s analyst consensus. Net income came in at $747.9 million or $2.33 per share, compared with $545.3 million or $1.72 per share a year earlier and above expectations.
However, Arista’s gross margin in the third quarter was 64.2%, slightly lower than the 64.9% a quarter earlier. In the fourth quarter, Arista expects gross margins to decline to between 63% and 64%.
Arista expects fourth-quarter revenue of $1.85 billion to $1.9 billion, higher than Visible Alpha’s consensus estimate. Some investors may have had higher expectations. Ahead of Thursday’s results, Citi analysts had forecast 28% growth in the fourth quarter, anticipating accelerating cloud spending driven by demand for AI.
Arista also announced a four-for-one stock split aimed at making its shares accessible to more investors, with split-adjusted trading starting on December 4. The company said its shareholders will receive three additional shares for each share they purchase. delay. The split will reduce the price of each share by a factor of four, but will not change the total value of investors’ holdings.
Arista shares fell more than 7% in extended trading Thursday after the publication. Through Thursday’s close, they were up about 83% this year.
