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Arista's Q3: A "Beat," But Did It Stink?
Alright, so Arista Networks (ANET) dropped their Q3 numbers, and the stock got smacked down like a cheap carnival game. Up nearly 40% YTD, and then BAM! 10% drop after hours. The headline? They "beat" expectations. Revenue up, EPS up... so what gives? Arista Networks falls on Q3 results despite 27% revenue growth (ANET:NYSE) - Seeking Alpha
The Devil's in the Guidance
Let's be real: Wall Street doesn't give a damn about yesterday's news. It's all about what's coming down the pike. And that, my friends, is where Arista stumbled.
They're projecting Q4 revenue between $2.3 and $2.4 billion. Fine, whatever. But then they drop the bomb: Gross margins are getting slashed to 62-63%. 62-63%?! They were patting themselves on the back for 65.2% just this quarter. That, my friends, is a problem.
And don't even get me started on operating margin. Flat at 47-48%. Flat is the new down, people. Especially when you're trying to sell the story that you're riding the AI gravy train. Speaking of which…
AI Hype Machine: Is It Real?
Arista keeps throwing around this "AI networking revenue above $1.5 billion for 2025" number. Okay, that sounds impressive. But how much of that is new revenue? How much of it is just re-labeled existing business? And are they really competing with the big boys like Nvidia and AMD in the AI space? I ain't convinced.
They've got two "AI Titan" customers that account for over 10% of sales each. So, basically, their entire AI strategy hinges on keeping these two mystery companies happy. That's not diversification, that's dependence. What happens when one of those "titans" decides to go in a different direction? Or gets acquired? Or, god forbid, builds their own damn networking solutions?
And these companies... are they even profitable? What if they fall apart? Just sayin'.
Plus, Kenneth Duda got named President & CTO, and Tyson Lamoreaux joined as SVP of Cloud & AI Networking. Okay, cool. New titles, new faces. But will it actually translate to better execution? Or is it just corporate reshuffling to distract us from the margin squeeze?
It reminds me of when my local pizza joint "rebranded" with a new logo and a slightly different shade of red on the walls... same soggy pizza, different lipstick.
I mean, deferred revenue reached $4.1 billion. That's gotta be good, right? (I'm genuinely asking, because sometimes I feel like I'm the only one who doesn't understand half of this stuff).
A "Once-in-a-Lifetime Opportunity"? Or a Slow Fade?
Arista CEO Jayshree Ullal called 2025 a "once-in-a-lifetime opportunity" to build a transformational networking company. That's what they all say, don't they? It's the same tired script. "We're disrupting the industry!" "We're revolutionizing the market!" Give me a break.
Offcourse, maybe I'm just being a cynical jerk. Maybe Arista really is on the verge of something big. Maybe their AI strategy will pay off in spades. Maybe those margin pressures are just temporary. Maybe…
But until I see some actual proof, I'm calling BS.