Cloud networking company Arista Networks Inc. is in big demand and its stock is making massive gains following a blowout third-quarter earnings report today.

The company reported earnings before certain costs such as stock compensation of $2.96 per share on revenue of $748.7 million, up 24% from the same period last year.

That was better than expected, with analysts looking for earnings of just $2.71 per share on revenue of $738.13 million. The results also beat Arista’s own forecast, which estimated sales of $725 million to $745 million.

Arista’s stock jumped, gaining more than 14% in extended trading.

Arista Chief Executive Jayshree Ullal (pictured) said the company was seeing from strong demand for its cloud networking portfolio across all customer sectors. “Despite a challenging supply chain environment, I am pleased with our delivery of another record quarter of Arista’s financial results in Q3 2021,” she said.

Arista sells a range of networking products including high-speed switches that are primarily used by hyperscale data center operators such as Facebook Inc. and Microsoft Corp. It also sells enterprise campus switches, where it competes with its much larger rival Cisco Systems Inc.

The other side of Arista’s business is software services, mainly network management and security software that’s infused with artificial intelligence that helps to identify the cause of faults, monitor user experiences and identify network threats.

Arista said its product revenue came to $604.1, while software services added $144.5 million.

“The business continued to perform well in the quarter, exceeding on all key financial metrics, while the team navigates a difficult supply environment,” said Arista Chief Financial Officer Ita Brennan.

In a call with analysts, Ullal revealed the company has been purchasing more components where possible to safeguard against the supply chain crunch.

“We are clearly in the midst of an acute supply chain crisis with increased prices and long lead times. We are changing our Arista mindset from our historical build to forecast and orders to build to invest, doubling our purchase commitments in excess of $2 billion and planning for the next 1 to 2 years,” she said.

In addition, Arista has been increasing prices of its products where necessary to account for computer chip price hikes. Ullal explained that lead times for many of the components it buys have extended to between 50 and 80 weeks, with price hikes ranging from 15% to as much as 200% for things such as copper, steel, substrate, printed circuit board, memory, silicon ICs, connectors, freight and labor.

“Arista has been deliberate and thoughtful about price increases so far, as we shared with you, but we have recently announced increased list prices effective November 4, 2021, averaging about an approximately 10% to offset the very high escalating costs.”

The good news, for Arista at least, is those price hikes should be enough to help it maintain a healthy balance sheet. For the fourth quarter, Arista said it’s expecting revenue of $775 million to $795 million, the midpoint of which is well ahead of Wall Street’s forecast of $754.06 million.

Photo: SiliconANGLE