Common-Size Income Statement
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Arista Networks Inc., common-size consolidated income statement
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
The common-size income statement reveals several noteworthy trends between 2021 and 2025. Revenue composition shifted modestly, with a slight increase in the proportion of revenue derived from services and a corresponding decrease from products. Profitability metrics demonstrate a consistent improvement over the period, while operating expenses as a percentage of revenue decreased significantly. The effective tax rate increased substantially in the final year of the observed period.
- Revenue Composition
- Product revenue consistently represented the majority of total revenue, ranging from 80.65% to 85.83% before decreasing slightly to 84.13%. Service revenue, while a smaller portion, exhibited a gradual increase from 15.18% to 15.87% of total revenue. This suggests a potential strategic focus on expanding service offerings.
- Cost Structure and Gross Profit
- Cost of revenue as a percentage of revenue decreased from 38.93% in 2022 to 35.87% in 2024, before increasing slightly to 35.94% in 2025. This improvement in cost management contributed to an increase in gross profit margin, which rose from 61.07% in 2022 to a peak of 64.13% in 2024, then slightly decreased to 64.06% in 2025.
- Operating Expenses
- A significant trend is the reduction in operating expenses as a percentage of revenue. Each component – research and development, sales and marketing, and general and administrative – decreased consistently over the five-year period. This resulted in a substantial decrease in total operating expenses, from 32.43% of revenue in 2021 to 21.24% in 2025, indicating improved operational efficiency.
- Profitability
- Income from operations improved considerably, increasing from 31.37% to 42.82% of revenue. This improvement, coupled with increasing other income, drove a substantial increase in income before income taxes, rising from 31.58% to 47.19%. Net income followed a similar trajectory, increasing from 28.52% to 38.99% of revenue.
- Other Income and Taxes
- Other income, net, increased significantly as a percentage of revenue, from 0.21% in 2021 to 4.37% in 2025, primarily driven by increases in interest income. The provision for income taxes as a percentage of revenue also increased substantially, from 3.05% in 2021 to 8.20% in 2025. This suggests a change in the company’s tax profile or a reduction in available tax benefits.