Arista(US:ANET) Huachuang Securities·2024-08-06 09:31Investment Rating - The report assigns a strong buy rating for Arista (ANET), expecting it to outperform the benchmark index by over 20% in the next six months [41]. Core Insights - Arista's revenue for FY24Q2 reached $1.69 billion, representing a year-over-year growth of 15.9% and a quarter-over-quarter increase of 7.6%. The non-GAAP gross margin was 65.4%, and diluted earnings per share were $2.08, reflecting a 32.9% increase [6][11][12]. - The company anticipates Q3 revenue to be between $1.72 billion and $1.75 billion, with a non-GAAP gross margin of 63% to 64% and an operating margin of 44% [10][20]. - Arista is focusing on expanding its customer base towards large-scale interconnects, targeting clusters of tens of thousands of cards, with some customers already increasing their GPU counts significantly [11][36]. Summary by Sections 1. Operating Performance for FY24Q2 - Arista reported a total revenue of $1.69 billion, with product revenue at $1.42 billion and service revenue at $267 million. The gross profit was $1.10 billion, leading to a non-GAAP gross margin of 65.4% [6][7][12]. 2. Revenue Breakdown - Revenue by region for FY24Q2 was as follows: Americas at $1.37 billion (81%), Europe, Middle East, and Africa at $179 million (11%), and Asia-Pacific at $137 million (8%). The Americas region saw an increase in revenue share, while the Asia-Pacific region experienced a decline [8][9]. 3. Q3 Guidance - The company expects Q3 revenue to be approximately $1.72 billion to $1.75 billion, with a non-GAAP gross margin of 63% to 64% and an operating margin of 44%. The actual tax rate is projected to be around 21.5% [10][20]. 4. Conference Call Highlights - During the conference call, it was noted that the strong performance in Q2 was driven by robust service and software renewals, which accounted for 17.6% of total revenue. The company has deployed over 100 million ports globally and is investing heavily in R&D, with expenditures reaching $216.7 million [11][12][36].