Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
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Profitability Ratios (Summary)
Arista Networks Inc., profitability ratios
Based on: 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), 10-K (reporting date: 2020-12-31).
The company's financial performance over the analyzed periods shows notable trends in profitability and returns metrics, reflecting improvements in operational efficiency and overall profitability.
- Gross Profit Margin
- The gross profit margin exhibited a slight fluctuation, starting at 63.94% in 2020 and decreasing to 61.07% in 2022, indicating a modest contraction in direct cost management or pricing power during that period. However, it rebounded to 64.13% by 2024, suggesting improved cost efficiency or enhanced revenue quality toward the end of the timeline.
- Operating Profit Margin
- This margin displayed a consistent upward trend throughout the periods, increasing from 30.19% in 2020 to a significant 42.05% in 2024. The steady growth indicates better control of operating expenses relative to revenue, enhanced operational scalability, or productivity gains impacting operating income positively.
- Net Profit Margin
- Net profitability also improved markedly, rising from 27.38% in 2020 to 40.73% in 2024. This improvement illustrates not only effective cost control at the operating level but also potential benefits on the net level such as tax efficiencies, reduced interest expenses, or other non-operating factors contributing to bottom-line growth.
- Return on Equity (ROE)
- ROE increased substantially from 19.11% in 2020 to a peak of 28.91% in 2023, slightly moderating to 28.54% in 2024. This suggests stronger profitability relative to shareholders' equity, reflecting efficient use of equity capital to generate earnings, although the marginal dip at the end may warrant monitoring for sustainability.
- Return on Assets (ROA)
- ROA rose significantly from 13.39% in 2020 to 20.31% in 2024, peaking at 20.98% in 2023. This trend indicates enhanced asset utilization and operational efficiency in generating net income from the company's assets, consistent with the improvements seen in profit margins and ROE.
Overall, the data reflects a positive trajectory in profitability and returns, driven by improved margins and effective asset and equity utilization. The consistent gains in operating and net profit margins alongside the robust rise in ROE and ROA suggest strategic and operational improvements contributing to enhanced financial health over the years analyzed.
Return on Sales
Return on Investment
Gross Profit Margin
Arista Networks Inc., gross profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Gross profit | ||||||
| Revenue | ||||||
| Profitability Ratio | ||||||
| Gross profit margin1 | ||||||
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| Apple Inc. | ||||||
| Cisco Systems Inc. | ||||||
| Dell Technologies Inc. | ||||||
| Super Micro Computer Inc. | ||||||
Based on: 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), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Gross profit margin = 100 × Gross profit ÷ Revenue
= 100 × ÷ =
2 Click competitor name to see calculations.
- Gross Profit
- The gross profit exhibits a consistent upward trend over the five-year period. Beginning at approximately 1.48 billion USD in 2020, it increases steadily each year, reaching roughly 4.49 billion USD by the end of 2024. This progression indicates significant growth in the company’s core earnings before operating expenses.
- Revenue
- Revenue follows a similar growth pattern, starting at about 2.32 billion USD in 2020 and rising continuously to 7.00 billion USD in 2024. The increasing revenue levels reflect expansion in sales and possibly market share, supporting the growth observed in gross profit values.
- Gross Profit Margin
- The gross profit margin, representing the ratio of gross profit to revenue, shows relative stability with minor fluctuations. It begins slightly below 64% in 2020 and remains close to this level over the reviewed years. There is a slight decrease in 2022 to around 61%, followed by a gradual recovery, culminating at approximately 64.13% in 2024. This suggests maintained efficiency in cost of goods sold despite increasing revenues, with a brief period of margin compression in the middle of the timeline.
Operating Profit Margin
Arista Networks Inc., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Income from operations | ||||||
| Revenue | ||||||
| Profitability Ratio | ||||||
| Operating profit margin1 | ||||||
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Apple Inc. | ||||||
| Cisco Systems Inc. | ||||||
| Dell Technologies Inc. | ||||||
| Super Micro Computer Inc. | ||||||
| Operating Profit Margin, Sector | ||||||
| Technology Hardware & Equipment | ||||||
| Operating Profit Margin, Industry | ||||||
| Information Technology | ||||||
Based on: 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), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Operating profit margin = 100 × Income from operations ÷ Revenue
= 100 × ÷ =
2 Click competitor name to see calculations.
The financial data demonstrate a consistent and notable growth trajectory over the five-year period from 2020 through 2024.
- Income from operations
- There is a steady increase in income from operations, growing from approximately $699.7 million in 2020 to nearly $2.94 billion in 2024. This represents more than a fourfold increase, indicating a significant expansion in operational profitability.
- Revenue
- Revenue shows a similar upward trend, increasing from roughly $2.32 billion in 2020 to over $7 billion in 2024. This strong growth in revenue underlines an expanding business scale and successful market engagement across the periods analyzed.
- Operating profit margin
- The operating profit margin improves consistently each year, from 30.19% in 2020 to 42.05% in 2024. This improvement suggests enhanced operational efficiency and better cost management, contributing to higher profitability relative to revenue.
Overall, the data reflect a robust financial performance with strong revenue growth accompanied by increased income from operations and a progressively improving operating profit margin. The upward trends indicate effective scaling and operational improvements over the observed timeframe.
Net Profit Margin
Arista Networks Inc., net profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income | ||||||
| Revenue | ||||||
| Profitability Ratio | ||||||
| Net profit margin1 | ||||||
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Apple Inc. | ||||||
| Cisco Systems Inc. | ||||||
| Dell Technologies Inc. | ||||||
| Super Micro Computer Inc. | ||||||
| Net Profit Margin, Sector | ||||||
| Technology Hardware & Equipment | ||||||
| Net Profit Margin, Industry | ||||||
| Information Technology | ||||||
Based on: 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), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Net profit margin = 100 × Net income ÷ Revenue
= 100 × ÷ =
2 Click competitor name to see calculations.
- Revenue
- The revenue shows a consistent upward trend over the five-year period. It increased from approximately 2.32 billion USD at the end of 2020 to around 7 billion USD by the end of 2024. This represents a significant growth, indicating strong sales expansion and market demand.
- Net Income
- Net income has also exhibited a robust increase, growing from about 635 million USD in 2020 to approximately 2.85 billion USD in 2024. This growth is roughly four and a half times the initial value, reflecting improved profitability in absolute terms.
- Net Profit Margin
- The net profit margin percentage has improved steadily each year, rising from 27.38% in 2020 to 40.73% in 2024. This indicates that not only has the company increased its total revenue and net income, but it has also become more efficient at converting revenue into profit, suggesting enhanced cost management or higher-value sales.
- Overall Insights
- The combined increase in revenue and net income alongside the improvement in net profit margin suggests a strong operational performance and financial health. The company has managed to scale its operations while simultaneously improving profitability. This may reflect competitive advantages, effective cost control measures, or shifts in product/service mix favoring higher margins.
Return on Equity (ROE)
Arista Networks Inc., ROE calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income | ||||||
| Stockholders’ equity | ||||||
| Profitability Ratio | ||||||
| ROE1 | ||||||
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Apple Inc. | ||||||
| Cisco Systems Inc. | ||||||
| Dell Technologies Inc. | ||||||
| Super Micro Computer Inc. | ||||||
| ROE, Sector | ||||||
| Technology Hardware & Equipment | ||||||
| ROE, Industry | ||||||
| Information Technology | ||||||
Based on: 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), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × ÷ =
2 Click competitor name to see calculations.
The financial data reveals several notable trends over the five-year span ending December 31, 2024.
- Net Income
- There has been a consistent and substantial increase in net income throughout the period. Starting at 634,557 thousand US dollars in 2020, net income nearly doubled by 2021 to 840,854 thousand US dollars. This upward trajectory accelerated in the subsequent years, reaching 1,352,446 thousand US dollars in 2022, then surging to 2,087,321 thousand US dollars in 2023, and further expanding to 2,852,054 thousand US dollars in 2024. This indicates robust profitability growth and effective operational execution.
- Stockholders’ Equity
- Stockholders’ equity also exhibited strong growth over the period. Beginning at 3,320,291 thousand US dollars in 2020, it increased steadily each year, reaching 3,978,600 thousand US dollars in 2021, then 4,885,820 thousand US dollars in 2022. In the last two years, the equity expanded more rapidly to 7,219,059 thousand US dollars in 2023 and then to 9,994,807 thousand US dollars in 2024. This rise points to strengthened financial stability and retained earnings accumulation.
- Return on Equity (ROE)
- The ROE percentage shows an overall rising trend, reflecting improved efficiency in generating profit from shareholders’ equity. ROE started at 19.11% in 2020, increased moderately to 21.13% in 2021, and then jumped significantly to 27.68% in 2022. The upward momentum continued with ROE reaching 28.91% in 2023. In 2024, a slight dip to 28.54% was observed, though the figure remains substantially higher than earlier years. This suggests that while profitability remains high relative to equity, growth in equity levels and net income has moderated slightly in relation to each other.
Overall, the data indicates a company experiencing strong and accelerating growth in profitability and equity base, with consistently improving returns on equity, demonstrating effective use of capital and expanding shareholder value.
Return on Assets (ROA)
Arista Networks Inc., ROA calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income | ||||||
| Total assets | ||||||
| Profitability Ratio | ||||||
| ROA1 | ||||||
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Apple Inc. | ||||||
| Cisco Systems Inc. | ||||||
| Dell Technologies Inc. | ||||||
| Super Micro Computer Inc. | ||||||
| ROA, Sector | ||||||
| Technology Hardware & Equipment | ||||||
| ROA, Industry | ||||||
| Information Technology | ||||||
Based on: 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), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
ROA = 100 × Net income ÷ Total assets
= 100 × ÷ =
2 Click competitor name to see calculations.
The financial data reveals consistent growth across all reported metrics over the five-year period ending December 31, 2024. Net income shows a strong upward trajectory, increasing from approximately 634.6 million US dollars in 2020 to about 2.85 billion US dollars in 2024. This signifies an impressive enhancement in profitability.
Total assets have also expanded notably, rising from around 4.74 billion US dollars in 2020 to approximately 14.04 billion US dollars in 2024. This substantial increase suggests significant asset accumulation, possibly reflecting business expansion or increased investments.
The return on assets (ROA) demonstrates an overall positive trend, improving from 13.39% in 2020 to peak at 20.98% in 2023, with a slight decline to 20.31% in 2024. This indicates enhanced efficiency in utilizing assets to generate earnings over the period, although the minor decrease in the final year may warrant further investigation.
- Net Income
- Exhibited strong growth, more than quadrupling over five years, reflecting improved profitability and possibly higher revenue or better cost management.
- Total Assets
- Increased nearly threefold, indicating expansion of the company's asset base, which could be attributed to acquisitions, capital expenditures, or retained earnings.
- Return on Assets (ROA)
- Improved significantly, suggesting better asset utilization and operational efficiency, with a slight dip in the last year that should be monitored.