Arista Networks reported third-quarter revenue of $3.66 billion, up 58.5% from a year earlier and above its own $3.3 billion guidance, and shares rose about 8% after hours. However, fourth-quarter guidance of $3.9 billion to $4.0 billion implies only 7% to 9% growth from the third quarter, signaling a sharp slowdown. GAAP gross margin fell to 63.6% from 64.6% as the mix shifted toward lower-margin product sales, which made up 87% of revenue. GAAP operating margin still rose to 44.9% from 42.4%, because operating expenses grew much more slowly than sales. GAAP diluted EPS of $1.22 exceeded the non-GAAP figure because it includes a $134.5 million gain on strategic investments, so the article considers operating profit the cleaner measure.
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