Arista Networks shares sink 15% on concerns about 'cloud titan' customers
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Arista Networks (NYSE:ANET) shares plunged more than 15% Tuesday as Wall Street's concerns about the cloud-networking company's outlook on equipment spending erased any enthusiasm for its upbeat quarterly report and outlook.
On Monday, Arista (ANET) said that it expects sales for the quarter that ends in June to be between $1.35B and $1.4B, which surpassed analysts' estimates for revenue of $1.35B. And along with that outlook, Arista (ANET) reported a first-quarter profit of $1.43 per share, on $1.35B in revenue, while analysts had forecast the company to earn $1.35 a share on sales of $1.31B.
At issue were comments that Arista (ANET) officials made about so-called "cloud titans"--large scale customers that use products from the likes of Arista (ANET) and Cisco Systems (CSCO)--to support their massive cloud-based services. Microsoft (MSFT) and Meta Platforms (META) have often been cited as two of Arista's (ANET) cloud titan customers.
"We expect some moderation in customer spending, especially with our cloud titan customers following [a] year of accelerated demand in 2022," said Arista (ANET) Chief Financial Officer Ita Brennan, on a conference all to discuss the company's results. 
Brennan added that in terms of quarterly business trends "you should expect moderating year-over-year growth as the year progresses with more difficult prior year [comparisons]."
Goldman Sachs analyst Michael Ng, who has a buy rating on Arista's (ANET) stock, said that Arista's (ANET) more cautious commentary around cloud titan spending, and inventory buildups "has reduced the likelihood of substantial revenue upside in 2023 and has led to concerns around the slowing 2023 exit growth rate."
Argus analyst Jim Kelleher said Arista's (ANET) comments that suggest that some pullback in spending by its leading cloud customers "is cause for concern and bears monitoring." However, Kelleher added that he sees "no evidence of competitive share loss" in what is a "fast-formulating cloud data center environment."
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