Arista Networks Stock Tumbles in Late Trading After Reporting Earnings

Arista Networks (ANET) shares tumbled in extended trading Thursday as the cybersecurity firm reported shrinking margins, despite profits that topped Wall Street’s expectations.

The cloud networking giant saw revenue grow 7% year-over-year to $1.81 billion, above the analyst consensus from Visible Alpha. Net income came in at $747.9 million or $2.33 per share, up from $545.3 million or $1.72 per share a year earlier and above projections.

However, Arista’s gross margin in the third quarter was 64.2%, down slightly from 64.9% a quarter earlier. In the fourth quarter, Arista said it expects gross margins to fall to between 63% and 64%.

Arista forecast fourth-quarter revenue of $1.85 billion to $1.9 billion, ahead of the consensus estimate compiled by Visible Alpha. Some investors may have had higher expectations. Ahead of Thursday’s results, Citi analysts had projected 28% growth in the fourth quarter, anticipating accelerating cloud spending driven by AI demand.

Arista also announced a four-for-one stock split, meant to make its stock accessible to more investors, with split-adjusted trading set to start on Dec. 4. The company said its stockholders will receive three additional shares for every one share they hold. The split will reduce the price of each share by a factor of four, but won’t change the total value of investors’ holdings.

Shares of Arista fell more than 7% in extended trading Thursday following the release. They were up about 83% for the year through Thursday’s close.