Arista Gains Big on Cloud Boom

So far, earnings season's reinforced some key growth trends in cloud infrastructure, with several webscale companies including Meta (formerly Facebook) boosting capital spending (capex) significantly. In the networking infrastructure market, Arista Networks (ANET) has received the bulk of the love, as its share price vaulted this week on booming earnings and its announcement that it has boosted its guidance to 30% revenue growth next year.

Today, Arista shares are up another 4% after gapping up 25% on the earnings news earlier in the week. On the earnings call Tuesday night, Arista piled on the good news for investors: After announcing third-quarter net income of $224.3 million, or $2.81 a share, compared with $168.4 million, or $2.12 a share, in the year-ago period, the company guided for revenue growth of 30% in the fourth quarter, putting its quarterly revenue in the range of $775 million to $795 million. The company wasn't done -- it also announced a large share buyback and and a stock split.

Arista shares are up 30% this week, reaching an all-time high of $531 in Thursday morning trading. They are up 80% so far this year.

Hyper Hyperscalers

Boosts in hyperscaler spending are behind a lot of the cloud enthusiasm and have helped boost Arista this week. Both Facebook and Microsoft are understood to be major Arista customers, and their spending is expect to continue to fuel the cloud boom.

Meta/Facebook recently boosted its capex forecast by 66%. The social media company said recently that it expects capital expenditures of $29 billion to $34 billion in 2022, up from an estimated $19 billion in 2021.

Google and Microsoft project mostly flat capex spending, but with their cloud revenues growing at a 50% and 45% clip, respectively, that may not remain so for long. Microsoft shares last week hit an all-time high and propelled Microsoft over Apple for the title of the world’s most valuable company.

Cloud Boom Rolls On

The cloud boom continues unabated, driven by hybrid and remote work, cloud applications, and digital transformation projects. Many other infrastructure vendors are also seeing huge gains. These include NVIDIA (NVDA), whose stock is up nearly 40% in just the last month. Its shares have been regularly hitting new highs and the company now sports a market cap of $650 billion. Broadcom Inc. (AVGO), a major supplier of networking and communications chips, also recently hit a new high.

Some recent highlights:

• NVIDIA has been rising on anticipation of news from its GPU Technology online conference next week. There, NVIDIA will announce new products, including its Omniverse Enterprise platform. NVIDIA shares are up more than 100% this year. NVIDIA earnings will be announced on November 17.
• Amazon recently reported that its Amazon Web Services unit had year-over-year (y/y) growth of 39% to $11.6 billion in quarterly earnings. That topped estimates for 35% cloud computing growth.
• Veeam, a leader in the backup, recovery, and data management market, recently announced another quarter of double-digit growth with an annual recurring revenue (ARR) increase of 28% y/y for Q3’21.

Arista Also Gains in Campus Networking

There are a couple key takeaways from these developments. First of all, it's clear that with Arista's gains there is still room for business growth from "branded" networking, rather than so-called whiteboxes, in the big cloud companies. Secondly, it appears that Arista continues the long-term trend of grabbing market share from networking giant Cisco (CSCO), which hasn't seen anywhere near the growth numbers in recent quarters.

In addition, Arista continues to make gains in the campus networking segment. Arista expects to double campus revenue to $400 million in 2022, representing about 7% growth.

When you put the whole picture together, Arista is one of the independent branded networking companies making serious market share gains across the board, in data center, cloud, and campus networking.