Why Arista Networks Inc. Stock Rose 18% in August

What happened

Shares of Arista Networks (NYSE: ANET) gained 18% in August, according to data from S&P Global Market Intelligence. The cloud-based networking specialist crushed Wall Street's estimates in a second-quarter report that was delivered early in the month. Arista shares soared 21% higher the next day and never looked back.

So what

Arista's top-line revenue increased 51% in the second quarter compared to the year-ago period. Landing at $405 million, the sales figure exceeded the consensus analyst estimate by $45 million, or 12%. On the bottom line, adjusted earnings surged 81% higher to stop at $1.34 per share. Here, the Street would have settled for $0.95 per share.

Now what

This company is blazing a fresh path through unexplored fields, more or less defining the cloud networking market as it goes. Arista is surrounded on all sides by much larger and more familiar companies, but still continues to deliver explosive growth on a regular basis. Trailing revenue has increased by 67% over the last two years, while free cash flows doubled and adjusted earnings per share nearly tripled.

So Arista's surging share price is based on strong financial fundamentals, which in turn spring from an innovative company culture. That's a great way to drive stock prices 18% higher in a single month -- and 114% higher in 52 weeks. And I don't think Arista's growth story is ending here.

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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Arista Networks. The Motley Fool has a disclosure policy.