Arista Networks' Revenue Decline and Uninspiring Q1 2020 Outlook Is Another Buy Opportunity
Arista Networks' (NYSE: ANET) earnings report last week indicated the company closed 2019 the way management foretold it would, and it reiterated more of the same is ahead for 2020: a slowdown in big data center spending, creating short-term uncertainty, and a possible first-ever annual sales decline for the company.
Shareholders of the networking hardware outfit have been put into into unfamiliar territory. That kind of uncertainty isn't comfortable, and it would have been nice to hear some more warm-and-fuzzy outlook comments at the start of the new decade. However, such situations potentially spell opportunity for growth companies with strong secular tailwinds blowing at their back.
Fourth-quarter 2019 revenue declined 7% year-over-year to $552.5 million, 19% of which was made up of service and software revenue compared with 15.5% a year ago. Adjusted gross margins increased to 65.2% from 64.1% in Q4 2018. Arista was a manic ride for the year, with lumpy sales causing plenty of ups and downs and cloud infrastructure, in general, slowed down. For example, its largest customers Microsoft and Facebook -- 23% and 16.6% of total Q4 revenue, respectively -- adjusted their buying activity for data center construction over the course of the year. Even still, shares rallied strongly from lows as Arista still posted a 12% revenue increase for the full-year period and adjusted gross margins came in at 64.7% versus 64.4% for 2018.
Source Fool.com
