Why Arista Networks Stock Jumped 26% in February

By Chris Neiger Markets Fool.com

What happened

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Arista Networks'(NYSE: ANET) stock price skyrocketed 26% last month, according to data provided byS&P Global Market Intelligence, after the company posted its fourth-quarter 2016 earnings and full-year 2016 report. Revenue in the quarter grew by more than 30% and Arista surpassed $1 billion in annual sales for the first time.

Image source: Getty Images.

So what

Investors were pleased with Arista's $328 million of revenue for the quarter, which marked a 33.6% increase from the year-ago quarter. GAAP gross margin also improved slightly from 63.6% to 64.1% year over year.Arista also saw net income increase from $43.9 million in Q4 2015 to $58.8 million in the most recent quarter.

In addition to the company's solid fourth-quarter performance Arista also reported strong growth for the full 2016 year, surpassing $1 billion in sales for the first time, which was a 34.8% increase year over year.

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On the fourth-quarter earnings call,CEO Jayshree Ullal said, "2016 was indeed a historic year" for the company, and added that, "Our customers are adopting cloud networking at an unprecedented pace."

Investors weren't deterred by Arista's ongoing lawsuits from Cisco Systems, and Ullal mentioned on that call that "Arista's firmly resolute and steadfast in lawful supply of our products and servicing them without disruption to our customers."

Now what

Heading into 2017, Arista's management expects revenue between $320 millionand $330 million, with non-GAAP gross margin between 61% and 64%.

Management mentioned that lead times and predictability of shipments should improve for the current quarter, and overall the leadership remains optimistic about the rest of the year.

Arista's CFO, Ita Brennan, said, "Looking forward to 2017, we believe that the demand drivers of the business remain strong with healthy growth in cloud networking and broad based adoption of our new products."

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Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Arista Networks. The Motley Fool recommends Cisco Systems. The Motley Fool has a disclosure policy.