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Arista Networks' revenue in the fourth quarter rose 33.6%, as the switch and router maker benefitted from large...
cloud providers' hunger for networking gear.
Arista reported the double-digit growth Thursday -- a day after rival Cisco had said revenue fell 3% in its previous quarter. The year-over-year decrease was due to weak sales in switching and routing, which fell 5% and 10%, respectively.
Arista's success is tied to the vendor's strength as a supplier to cloud service providers, such as Microsoft, and other companies with web-scale data centers.
"[Arista] caters to a very specific subset of data center networks by offering a very streamlined feature set, industry-leading programmability and lots of advanced technologies that are aimed directly at high-end data centers," said Shamus McGillicuddy, an analyst at Enterprise Management Associates, based in Boulder, Colo. "It is executing very well with that narrow focus."
Arista's customers are spending more on networking gear, while Cisco's core customer base of mainstream enterprises is buying less. Many of Cisco's customers are cutting data center hardware by moving applications to cloud providers.
By the end of this year, companies with cloud environments are expected to increase spending on servers, storage and switches by more than 18% to $44 billion, according to IDC. Companies buying noncloud IT infrastructure will spend 3% less.
Arista Networks' revenue reflects rising market share
In reporting earnings, Arista also released numbers from Crehan Research showing the company taking market share from Cisco in the high-speed data center switching market. From 2011 to mid-2016, Arista's share rose from 3% to 15%, while Cisco's fell from 73% to 53%, according to Crehan.
Last March, Arista introduced the 7500R Series of switches to take advantage of cloud providers moving from 10 Gigabit Ethernet spine switches to 25 GbE. Arista expects to sell 100 of the new switches by the summer, company CEO Jayshree Ullal told financial analysts during a conference call.
Along with introducing a new product, Arista has partnered with Hewlett Packard Enterprise to help drive growth. In November, HPE started reselling Arista's switching products as a companion to its hyper-converged appliances.
Arista expects the partnership to start adding to its customer base in the second half of this year or 2018. "We see it as very synergistic, very complementary, and things have been going well," Ullal said. "We're off to a good start, but a long ways to go on execution."
For the quarter ended Dec. 31, Arista Networks' revenue increased to $328 million. Net income grew to $58.8 million, or 79 cents a share, from $43.9 million, or 60 cents a share, a year ago. For the full year, Arista revenue was $1.1 billion, marking the first time revenue topped a billion dollars.
For the current quarter, the company forecasts revenue between $320 million and $330 million.
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