DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
Quarterly Data
Decomposing ROE involves expressing net income divided by shareholders’ equity as the product of component ratios.
Two-Component Disaggregation of ROE
Arista Networks Inc., decomposition of ROE (quarterly data)
Based on: 10-Q (reporting date: 2025-06-30), 10-Q (reporting date: 2025-03-31), 10-K (reporting date: 2024-12-31), 10-Q (reporting date: 2024-09-30), 10-Q (reporting date: 2024-06-30), 10-Q (reporting date: 2024-03-31), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31).
The analysis of the quarterly financial performance metrics reveals consistent improvement and relative stability in key profitability ratios over the observed periods.
- Return on Assets (ROA)
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ROA demonstrates a general upward trend from 13.82% at the beginning of the period to a peak near 21.69% by the end of 2023. Following this peak, the metric shows minor fluctuations but maintains a high return level above 19% through mid-2025. This indicates increasing efficiency in asset utilization over time, reflecting the company’s enhanced ability to generate profit from its asset base.
- Financial Leverage
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The financial leverage ratio remains relatively stable, oscillating slightly around a narrow range from 1.41 to 1.52. There is no significant increase or decrease, suggesting the company maintains a consistent capital structure, relying on a balanced mix of debt and equity financing. This steady leverage indicates controlled financial risk throughout the periods.
- Return on Equity (ROE)
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ROE increased steadily from 19.6% early in the timeline and peaked around 29.93% by the first half of 2025, illustrating strong growth in profitability relative to shareholder equity. The company's capacity to generate earnings on invested equity improved markedly, with only minor dips in some quarters. The increase in ROE, coupled with steady financial leverage, points to enhanced operational performance and effective management of financial resources.
Overall, the analyzed metrics suggest a positive trajectory in profitability and asset performance, combined with prudent financial management. The consistent improvement in returns, without accompanying high financial leverage, reflects a well-balanced operational and financial strategy supporting sustained growth.
Three-Component Disaggregation of ROE
Arista Networks Inc., decomposition of ROE (quarterly data)
Based on: 10-Q (reporting date: 2025-06-30), 10-Q (reporting date: 2025-03-31), 10-K (reporting date: 2024-12-31), 10-Q (reporting date: 2024-09-30), 10-Q (reporting date: 2024-06-30), 10-Q (reporting date: 2024-03-31), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31).
The financial analysis reveals noteworthy trends across key performance ratios over the examined periods.
- Net Profit Margin
- The net profit margin exhibited a consistent upward trajectory throughout the periods. Starting at 27.48% in March 2021, it progressively improved to reach 40.89% by June 2025. This steady increase suggests enhanced operational efficiency and effective cost management contributing to higher profitability.
- Asset Turnover
- Asset turnover showed a moderate increase from 0.5 in March 2021 to a peak of 0.65 in December 2022, indicating improved utilization of assets to generate revenue during this period. However, after reaching this peak, a declining trend followed, dropping to 0.48 by June 2025. This decline points to a reduced rate of revenue generation from asset base in recent quarters, requiring attention to asset management.
- Financial Leverage
- Financial leverage ratios remained relatively stable with minor fluctuations. Starting at 1.42 in March 2021, it slightly decreased to around 1.38 by December 2023 before increasing gradually to 1.52 by June 2025. This indicates a cautious approach to debt financing, with a modest increase in leverage towards the latter periods, potentially to support growth or investment initiatives.
- Return on Equity (ROE)
- The return on equity demonstrated an overall increasing trend, beginning at 19.6% in March 2021 and climbing steadily to approximately 29.83% by June 2025. Though minor fluctuations occurred, the upward trend reflects effective use of shareholder equity to generate earnings, supported by improving profit margins and controlled leverage.
In summary, the company shows strong improvement in profitability and shareholder returns, underpinned by rising net profit margins and ROE. However, the declining asset turnover in recent periods suggests potential inefficiencies or slower revenue growth relative to the asset base, which may warrant strategic focus. Financial leverage remains moderate, with a slight upward tendency that should be monitored to balance growth and risk.
Two-Component Disaggregation of ROA
Arista Networks Inc., decomposition of ROA (quarterly data)
Based on: 10-Q (reporting date: 2025-06-30), 10-Q (reporting date: 2025-03-31), 10-K (reporting date: 2024-12-31), 10-Q (reporting date: 2024-09-30), 10-Q (reporting date: 2024-06-30), 10-Q (reporting date: 2024-03-31), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31).
- Net Profit Margin
- The net profit margin exhibits a consistent upward trend over the observed periods. Starting at 27.48% in the first quarter of 2021, it gradually increases, reaching 30.87% by the end of 2022. This upward momentum continues more sharply in 2023 and the first half of 2024, peaking at 40.89% by mid-2025. This indicates an improving ability to convert revenue into profit, reflecting enhanced operational efficiency or favorable pricing and cost management strategies.
- Asset Turnover
- Asset turnover shows some fluctuations throughout the timeline. Initially stable around 0.5 in early 2021, it increases significantly to reach a high of 0.65 by the end of 2022. However, from 2023 onward, asset turnover demonstrates a gradual decline, falling to 0.48 by mid-2025. This decline could suggest either a relative decrease in sales generation compared to asset levels or asset base expansion outpacing revenue growth during this latter period.
- Return on Assets (ROA)
- Return on assets reflects an overall upward trajectory with some fluctuations. Beginning at 13.82% in the first quarter of 2021, ROA grows steadily and peaks near 20.98% at the end of 2023. Following this peak, ROA slightly recedes, ranging between 19.67% and 21.69% through mid-2025. This pattern suggests sustained improvement in asset utilization and profitability, although the slight decline towards the end may point to emerging challenges in maintaining the highest efficiency levels or profitability on asset investments.