Arista Networks, Inc 10-K for FY2023

Arista Networks, Inc. (ANET)

10-K 2024-02-13 For: 2023-12-31

Added on April 03, 2026

About this 10-K

Arista Networks, Inc filed this 10-K on February 13, 2024, covering the fiscal year ended December 31, 2023 (FY2023).

Headline figures

Fiscal year ended December 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $5.86B; up 33.8% from $4.38B a year earlier
Net income: $2.09B; up 54.3% from net income of $1.35B a year earlier
Diluted EPS: $6.58; up 54.1% from $4.27 a year earlier

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Delaware						20-1751121
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	ANET	New York Stock Exchange


		Page
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	14
Item 1B.	Unresolved Staff Comments	49
Item 1C.	C ybersecurity	49
Item 2.	Properties	50
Item 3.	Legal Proceedings	50
Item 4.	Mine Safety Disclosures	50

PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	51
Item 6.	[Reserved]	53
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	54
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	66
Item 8.	Financial Statements and Supplementary Data	68
Item 9.	Change in and Disagreements With Accountants on Accounting and Financial Disclosure	103
Item 9A.	Controls and Procedures	103
Item 9B.	Other Information	104
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	104

PART III
Item 10.	Directors, Executive Officers, and Corporate Governance	105
Item 11.	Executive Compensation	105
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	105
Item 13.	Certain Relationships and Related Transactions and Director Independence	105
Item 14.	Principal Accountant Fees and Services	105

PART IV
Item 15.	Exhibits and Financial Statement Schedules	106
Item 16.	Form 10-K Summary	109
	Signatures	110


	Year Ended December 31,
	2023					2022					Change in
	$			% of Revenue		$			% of Revenue		$		%
Revenue
Product	$	5,029,493		85.8	%	$	3,716,079		84.8	%	$	1,313,414	35.3	%
Service	830,675			14.2		665,231			15.2		165,444		24.9
Total revenue	5,860,168			100.0		4,381,310			100.0		1,478,858		33.8
Cost of revenue
Product	2,061,167			35.2		1,573,629			35.9		487,538		31.0
Service	168,720			2.9		131,985			3.0		36,735		27.8
Total cost of revenue	2,229,887			38.1		1,705,614			38.9		524,273		30.7
Gross profit	$	3,630,281		61.9	%	$	2,675,696		61.1	%	$	954,585	35.7	%
Gross margin	61.9		%			61.1		%


	Year Ended December 31,
	2023		% of Total		2022		% of Total
Americas	$	4,651,193	79.4	%	$	3,462,621	79.0	%
Europe, Middle East and Africa	670,960		11.4		529,800		12.1
Asia-Pacific	538,015		9.2		388,889		8.9
Total revenue	$	5,860,168	100.0	%	$	4,381,310	100.0	%


☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Year Ended December 31,
	2022					2021					Change in
	$			% of Revenue		$			% of Revenue		$		%
Revenue
Product	$	3,716,079		84.8	%	$	2,377,727		80.7	%	$	1,338,352	56.3	%
Service	665,231			15.2		570,310			19.3		94,921		16.6
Total revenue	4,381,310			100.0		2,948,037			100.0		1,433,273		48.6
Cost of revenue
Product	1,573,629			35.9		958,363			32.5		615,266		64.2
Service	131,985			3.0		108,895			3.7		23,090		21.2
Total cost of revenue	1,705,614			38.9		1,067,258			36.2		638,356		59.8
Gross profit	$	2,675,696		61.1	%	$	1,880,779		63.8	%	$	794,917	42.3	%
Gross margin	61.1		%			63.8		%


						Page
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42)						69
Consolidated Balance Sheets						72
Consolidated Statements of Operations						73
Consolidated Statements of Comprehensive Income						74
Consolidated Statements of Stockholders' Equity						75
Consolidated Statements of Cash Flows						76
Notes to the Consolidated Financial Statements						77


			Inventory Valuation and Contract Manufacturer/Supplier Liabilities
Description of the Matter			As discussed in Note 1 of the consolidated financial statements, the Company’s inventories are stated at the lower of cost (computed using the first-in, first-out method) and net realizable value. The Company’s inventory balance totaled $1.9 billion on December 31, 2023. The Company records a provision when inventory is determined to be in excess of anticipated demand, or obsolete, to adjust inventory to its estimated realizable value. The Company records a contract manufacturer/supplier liability and a corresponding charge for non-cancellable, non-returnable purchase commitments with contract manufacturers or suppliers for quantities in excess of the Company’s demand forecasts, or that are considered obsolete. Auditing management’s assessment of net realizable value for inventory and contract manufacturer/supplier liabilities was complex and highly judgmental due to the assessment of management’s estimates of forecasted product demand, which can be impacted by changes in overall customer demand, changes in the timing of the introduction and customer adoption of new products, adjustments to manufacturing and engineering schedules, and overall general economic and market conditions.
How We Addressed the Matter in Our Audit			We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s determination of the net realizable value of inventory and the contract manufacturer/supplier liability. This included controls over the preparation of the demand and production forecasts, and the evaluation of the accuracy and completeness of the inventory provision and contract manufacturer/supplier liability. To test the inventory provision and contract manufacturer/supplier liability, we performed audit procedures that included, among others, assessing the Company’s methodology over the computation of the provision and liability, testing the significant assumptions and the underlying inputs used by the Company in its analysis including historical sales trends, expectations regarding future sales, changes in the Company’s business, customer base and other relevant factors.


	December 31,
	2023		2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,938,606	$	671,707
Marketable securities	3,069,362		2,352,022
Accounts receivable, net	1,024,569		923,096
Inventories	1,945,180		1,289,706
Prepaid expenses and other current assets	412,518		314,217
Total current assets	8,390,235		5,550,748
Property and equipment, net	101,580		95,009
Acquisition-related intangible assets, net	88,768		122,205
Goodwill	268,531		265,924
Deferred tax assets	945,792		574,912
Other assets	151,900		166,612
TOTAL ASSETS	$	9,946,806	$	6,775,410
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	435,059	$	232,572
Accrued liabilities	407,302		292,487
Deferred revenue	915,204		637,432
Other current liabilities	152,041		131,040
Total current liabilities	1,909,606		1,293,531
Income taxes payable	95,751		89,839
Deferred revenue, non-current	591,000		403,814
Other long-term liabilities	131,390		102,406
TOTAL LIABILITIES	2,727,747		1,889,590
Commitments and contingencies (Note 5)
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.0001 par value—100,000 shares authorized and no shares issued and outstanding as of December 31, 2023 and 2022	—		—
Common stock, $0.0001 par value—1,000,000 shares authorized as of December 31, 2023 and 2022; 312,245 and 306,890 shares issued and outstanding as of December 31, 2023 and 2022	31		31
Additional paid-in capital	2,108,331		1,780,714
Retained earnings	5,114,025		3,138,983
Accumulated other comprehensive income (loss)	(3,328)		(33,908)
TOTAL STOCKHOLDERS’ EQUITY	7,219,059		4,885,820
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	9,946,806	$	6,775,410


	Common Stock			Additional Paid-		Retained		Accumulated Other		Total Stockholders’
	Shares	Amount		In Capital		Earnings		Comprehensive Income (Loss)		Equity
Balance — December 31, 2020	304,696	$	30	$	1,292,409	$	2,027,614	$	238	$	3,320,291

Net income	—	—		—		840,854		—		840,854
Other comprehensive loss, net of tax	—	—		—		—		(8,538)		(8,538)
Stock-based compensation	—	—		186,875		—		—		186,875
Issuance of common stock in connection with employee equity incentive plans	7,693	1		67,244		—		—		67,245
Repurchase of common stock	(4,537)	—		—		(411,645)		—		(411,645)
Tax withholding paid for net share settlement of equity awards	(171)	—		(16,482)		—		—		(16,482)

Balance — December 31, 2021	307,681	31		1,530,046		2,456,823		(8,300)		3,978,600

Net income	—	—		—		1,352,446		—		1,352,446
Other comprehensive loss, net of tax	—	—		—		—		(25,608)		(25,608)
Stock-based compensation	—	—		230,934		—		—		230,934
Issuance of common stock in connection with employee equity incentive plans	5,908	1		48,410		—		—		48,411
Repurchase of common stock	(6,461)	(1)		—		(670,286)		—		(670,287)
Tax withholding paid for net share settlement of equity awards	(271)	—		(32,725)		—		—		(32,725)
Common stock issued for business acquisition	33	—		4,049		—		—		4,049
Balance — December 31, 2022	306,890	31		1,780,714		3,138,983		(33,908)		4,885,820

Net income	—	—		—		2,087,321		—		2,087,321
Other comprehensive income, net of tax	—	—		—		—		30,580		30,580
Stock-based compensation	—	—		296,756		—		—		296,756
Issuance of common stock in connection with employee equity incentive plans	6,480	—		62,093		—		—		62,093
Repurchase of common stock	(954)	—		—		(112,279)		—		(112,279)
Tax withholding paid for net share settlement of equity awards	(203)	—		(33,563)		—		—		(33,563)

Common stock issued for business acquisition	32	—		2,331		—		—		2,331
Balance — December 31, 2023	312,245	$	31	$	2,108,331	$	5,114,025	$	(3,328)	$	7,219,059


	December 31, 2023								December 31, 2022
	Level I		Level II		Level III		Total		Level I		Level II		Level III		Total
Financial Assets:
Cash Equivalents:
Money market funds	$	1,015,705	$	—	$	—	$	1,015,705	$	322,294	$	—	$	—	$	322,294
Commercial paper	—		1,999		—		1,999		—		5,422		—		5,422
Agency securities	—		—		—		—		—		17,559		—		17,559
U.S. government notes	—		—		—		—		51,986		—		—		51,986
	1,015,705		1,999		—		1,017,704		374,280		22,981		—		397,261
Marketable Securities:

Certificates of deposits (1)	—		5,000		—		5,000		—		10,492		—		10,492
U.S. government notes	1,044,859		—		—		1,044,859		993,955		—		—		993,955
Corporate bonds	—		1,362,124		—		1,362,124		—		1,113,134		—		1,113,134
Agency securities	—		657,379		—		657,379		—		215,380		—		215,380
Marketable equity securities(2)	—		—		—		—		19,061		—		—		19,061
	1,044,859		2,024,503		—		3,069,362		1,013,016		1,339,006		—		2,352,022
Other Assets:
Money market funds - restricted	858		—		—		858		4,271		—		—		4,271
Total Financial Assets	$	2,061,422	$	2,026,502	$	—	$	4,087,924	$	1,391,567	$	1,361,987	$	—	$	2,753,554


	December 31, 2023								December 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value

U.S. government	1,043,445		2,874		(1,460)		1,044,859		1,007,175		3		(13,223)		993,955
Corporate bonds	1,361,132		2,810		(1,818)		1,362,124		1,125,920		271		(13,057)		1,113,134
Agency securities	657,118		1,143		(882)		657,379		217,893		83		(2,596)		215,380
Total	$	3,061,695	$	6,827	$	(4,160)	$	3,064,362	$	2,350,988	$	357	$	(28,876)	$	2,322,469


	December 31, 2023
	Unrealized Losses within 12 months				Unrealized Losses 12 months or greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. government notes	$	317,376	$	(1,076)	$	108,739	$	(384)	$	426,115	$	(1,460)
Corporate bonds	610,086		(1,423)		141,943		(395)		752,029		(1,818)
Agency securities	340,537		(772)		20,809		(110)		361,346		(882)
Total	$	1,267,999	$	(3,271)	$	271,491	$	(889)	$	1,539,490	$	(4,160)


	Year Ended December 31,
	2023				2022				Change in
	$		% of Revenue		$		% of Revenue		$		%
Operating expenses:
Research and development	$	854,918	14.6	%	$	728,394	16.6	%	$	126,524	17.4	%
Sales and marketing	399,034		6.8		326,955		7.5		72,079		22.0
General and administrative	119,080		2.0		93,241		2.1		25,839		27.7

Total operating expenses	$	1,373,032	23.4	%	$	1,148,590	26.2	%	$	224,442	19.5	%


	Year Ended December 31,
	2023				2022				Change in
	$		% of Revenue		$		% of Revenue		$		%
Other income (expense), net:
Interest income	$	152,421	2.6	%	$	27,556	0.6	%	$	124,865	453.1	%

Gain (loss) on strategic investments	18,699		0.3		27,479		0.6		(8,780)		(32.0)
Other income (expense), net	(6,343)		(0.1)		(345)		—		(5,998)		1,738.6
Total other income, net	$	164,777	2.8	%	$	54,690	1.2	%	$	110,087	201.3	%


	Year Ended December 31,
	2022				2021				Change in
	$		% of Revenue		$		% of Revenue		$		%
Operating expenses:
Research and development	$	728,394	16.6	%	$	586,752	19.9	%	$	141,642	24.1	%
Sales and marketing	326,955		7.5		286,171		9.7		40,784		14.3
General and administrative	93,241		2.1		83,117		2.8		10,124		12.2

Total operating expenses	$	1,148,590	26.2	%	$	956,040	32.4	%	$	192,550	20.1	%


	Year Ended December 31,
	2022				2021				Change in
	$		% of Revenue		$		% of Revenue		$		%
Other income, net:
Interest income	$	27,556	0.6	%	$	7,215	0.2	%	$	20,341	281.9	%
Gain on investments in privately-held companies	27,479		0.6		—		—		27,479		100.0
Other income (expense), net	(345)		—		(1,075)		—		730		(67.9)
Total other income, net	$	54,690	1.2	%	$	6,140	0.2	%	$	48,550	790.7	%


	December 31, 2023
Due in 1 year or less	$	1,627,780
Due in 1 year through 2 years	1,436,582
Total marketable securities	$	3,064,362


	December 31, 2023		December 31, 2022
Cost of investments (1)	$	31,656	$	23,625
Cumulative impairment and downward adjustments	—		(888)
Cumulative upward adjustments	30,632		16,731
Carrying amount of investments (included in other assets)	$	62,288	$	39,468


	Acquisition Date Fair Value		Weighted Average Estimated Useful Life (in years)
Developed technology	$	30,200	5.7
Customer relationships	28,700		7.0
Trade name	3,400		3.0
Total intangible assets acquired	$	62,300


	Amount
Balance at December 31, 2021	$	188,397
Additions related to current year acquisitions	85,048
Measurement-period adjustments	(7,521)
Balance at December 31, 2022	265,924
Additions related to current year acquisition	2,607
Balance at December 31, 2023	$	268,531


	Gross Carrying Amount						Accumulated Amortization						Net Carrying Amount				Weighted Average Remaining Useful Life (in years)
	December 31, 2022		Additions		December 31, 2023		December 31, 2022		Amortization		December 31, 2023		December 31, 2022		December 31, 2023
Developed technology	$	154,930	$	—	$	154,930	$	(79,036)	$	(23,457)	$	(102,493)	$	75,894	$	52,437	4.0
Customer relationships	54,620		—		54,620		(14,097)		(7,700)		(21,797)		40,523		32,823		4.7
Trade name	12,390		—		12,390		(6,602)		(2,280)		(8,882)		5,788		3,508		1.6
Total	$	221,940	$	—	$	221,940	$	(99,735)	$	(33,437)	$	(133,172)	$	122,205	$	88,768	4.2


Years Ending December 31,	Future Amortization Expense
2024	$	26,759
2025	19,642
2026	17,260
2027	13,436
2028	10,037
Thereafter	1,634
Total	$	88,768


	December 31, 2023		December 31, 2022
Right-of-use assets:
Operating lease right-of-use assets (included in other assets)	$	55,890	$	53,390


Lease liabilities:
Operating lease liabilities, current (included in other current liabilities)	21,106		19,878
Operating lease liabilities, non-current (included in other long-term liabilities)	44,413		43,964
Total operating lease liabilities	$	65,519	$	63,842


	Number of Shares Underlying Outstanding Options	Weighted- Average Exercise Price per Share		Weighted- Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value
Balance—December 31, 2022	5,769	$	14.09	2.0	$	618,774
Options granted	—	—
Options exercised	(3,310)	9.84
Options canceled	(2)	7.82
Balance—December 31, 2023	2,457	$	19.83	1.7	$	529,931
Vested and exercisable—December 31, 2023	2,247	$	18.14	1.5	$	488,319


	Number of Shares	Weighted- Average Grant Date Fair Value Per Share
Unvested balance—December 31, 2022	8,360	$	85.83
RSUs and PRSUs granted	2,664	157.94
RSUs and PRSUs vested	(2,862)	78.81
RSUs and PRSUs forfeited/canceled	(262)	100.46
Unvested balance—December 31, 2023	7,900	$	112.76


			ARISTA NETWORKS, INC.
			(Registrant)
Dated:	February 12, 2024	By:	/s/ JAYSHREE ULLAL
			Jayshree Ullal
			President, Chief Executive Officer and Chairperson of the Board
			(Principal Executive Officer)


Name of Subsidiary						Jurisdiction of Incorporation
Arista Networks Limited						Ireland
Arista Technology Ireland Unlimited Company						Ireland
Arista Networks Holding Corporation						United States
Arista Holding Limited						Ireland


/s/ JAYSHREE ULLAL
Jayshree Ullal
President, Chief Executive Officer and Director
(Principal Executive Officer)


/s/ ITA BRENNAN
Ita Brennan
Chief Financial Officer
(Principal Accounting and Financial Officer)


By:			/s/ JAYSHREE ULLAL
Name:			Jayshree Ullal
Title:			President, Chief Executive Officer and Director
			(Principal Executive Officer)