Arista Networks, up nearly 50% so far this year, plunges after earnings.
Shares of once high-flying Arista Networks Inc. tumbled Thursday afternoon, after the software-based networking company cited a big pause in spending by a “cloud titan,” which analysts said was Microsoft Corp.
This one cloud titan is most likely Microsoft’s MSFT, -1.31% Azure business, which Arista specified in its most recent 10K accounted for more than 10% of its revenue. When Erik Suppiger, an analyst with JMP Securities simply stated, “so you haven’t changed your expectation in terms of the contribution from Microsoft,” for the full year, Ullal responded, “we have to see the second half and then we’ll know better.
“Arista saw less than normal order strength in March , specifically from Microsoft, and further weakness with Service Providers,” said Andrew Nowinski, a Piper Jaffray analyst, in a note to clients Thursday evening. Other analysts tried to find out if other cloud companies are having issues or if the main “cloud titan” was the only issue in the quarter. The sudden halt in orders came in mid-March, Ullal said. And she said that other cloud companies also seem to be putting a bit of a pause on ordering.
Arista’s sudden shift was a big shock for some investors and analysts, and the term “cloud titans” was repeated nearly 20 times on the call. In February, after its fourth-quarter earnings and upbeat guidance, Arista was upgraded by several firms. According to Factset, 20 analysts have the equivalent of a buy rating, 10 have a hold, and one has a sell.
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