Actions of Arista Networks Inc. fell more than 6 percent in late trade after the company reported strong third-quarter earnings and revenue and provided guidance that beat expectations.

The company reported earnings before certain costs such as stock compensation of $2.40 per share, while its revenue rose 20% from a year earlier to $1.81 billion. The results were much better than expected, with Wall Street analysts looking for earnings of just $2.08 per share on sales of $1.75 billion.

Net income for the quarter was $747.9 million, up from $545.3 million in the year-ago period.

Arista is a much larger rival to Cisco Systems Inc. in the computer networking industry, focused on selling premium equipment such as high-speed switches that speed communications between racks of computer servers in corporate data centers. Among its biggest customers are so-called cloud hyperscaler providers such as Microsoft Corp. and Facebook parent Meta Platforms Inc., although the company also has a strong foothold in the enterprise market with large companies, educational institutions and government agencies.

The company has delivered a series of impressive earnings and income over the past year as hyperscalers and enterprises ramp up spending on cloud computing and AI-related infrastructure. AI applications need a fast communications infrastructure to run efficiently, and that’s exactly what Arista provides with its state-of-the-art network switches and routers.

Arista’s rivals also benefited from the interest in AI. Last week, Juniper Networks Inc., pending approval of an acquisition by Hewlett Packard Enterprise Co., posted similarly strong earnings and revenue growth, citing demand for AI. Arista said earlier this year that it expects to do so generates about $750 million in AI-related revenue.

“Arista remains at the forefront of next-generation data centers in client-to-cloud and AI-focused locations,” said Arista President and Chief Executive Officer Jayshree Ullal (pictured). “Our Q3 2024 results demonstrate once again our continued commitment to customer priorities as well as delivering strong financial results.”

For the current quarter, Arista sees no sign of AI demand slowing. It anticipates revenue between $1.85 billion and $1.9 billion, well above The Street’s estimate of $1.8 billion. It also forecast an adjusted operating margin of 44%, compared to analysts’ forecast of 43.5%.

In addition to today’s results, Arista announced plans for a four-for-one stock split that will take effect at the close of trading on Dec. 3.

The after-hours drop in Arista stock may have been more about investors taking profit than any disappointment with the company’s performance. Before today’s move, the stock had gained 83% year to date.

Photo: SiliconANGLE