Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
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- Statement of Comprehensive Income
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Geographic Areas
- Enterprise Value to FCFF (EV/FCFF)
- Capital Asset Pricing Model (CAPM)
- Selected Financial Data since 2014
- Return on Equity (ROE) since 2014
- Price to Earnings (P/E) since 2014
- Price to Operating Profit (P/OP) since 2014
- Price to Book Value (P/BV) since 2014
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Profitability Ratios (Summary)
Arista Networks Inc., profitability ratios
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 profitability metrics demonstrate a generally positive trend over the observed period. Improvements are evident across all measured ratios, with a slight moderation in the most recent year. Gross profit margin exhibits relative stability, while operating and net profit margins show more substantial gains. Asset and equity utilization also improved, though with some recent fluctuation.
- Gross Profit Margin
- The gross profit margin remained relatively consistent, beginning at 63.80% in 2021, decreasing to 61.07% in 2022, and then recovering to 61.95% in 2023. Further improvement was seen in 2024, reaching 64.13%, followed by a slight decrease to 64.06% in 2025. This suggests stable cost of goods sold management with minor fluctuations.
- Operating Profit Margin
- A clear upward trend is observed in the operating profit margin. It increased from 31.37% in 2021 to 34.86% in 2022, then to 38.52% in 2023, and continued to rise to 42.05% in 2024. While still high, the rate of increase slowed in 2025, with the margin settling at 42.82%. This indicates improving operational efficiency and cost control.
- Net Profit Margin
- The net profit margin mirrors the trend of the operating profit margin, showing consistent growth from 28.52% in 2021 to 30.87% in 2022, 35.62% in 2023, and 40.73% in 2024. A slight decrease to 38.99% is noted in 2025, potentially due to increased non-operating expenses or a change in the effective tax rate.
- Return on Equity (ROE)
- Return on equity increased significantly from 21.13% in 2021 to 27.68% in 2022, and 28.91% in 2023. The growth rate moderated in subsequent years, with values of 28.54% in 2024 and 28.39% in 2025. This suggests efficient utilization of shareholder equity to generate profits, with stabilization in recent periods.
- Return on Assets (ROA)
- Return on assets also demonstrates an improving trend, rising from 14.66% in 2021 to 19.96% in 2022 and 20.98% in 2023. The increase slowed in 2024 (20.31%), and a more noticeable decrease occurred in 2025, with the ratio falling to 18.05%. This indicates a slight reduction in the efficiency of asset utilization in the most recent year.
Overall, the company demonstrates strengthening profitability. While the growth rate of some metrics slowed or slightly declined in 2025, the levels remain generally high compared to the earlier years in the period. Further investigation into the factors contributing to the 2025 moderation may be warranted.
Return on Sales
Return on Investment
Gross Profit Margin
Arista Networks Inc., gross profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| 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: 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).
1 2025 Calculation
Gross profit margin = 100 × Gross profit ÷ Revenue
= 100 × ÷ =
2 Click competitor name to see calculations.
The gross profit margin exhibited a generally stable pattern over the five-year period, with some fluctuation. While initially decreasing, it demonstrated improvement in later years, ultimately stabilizing at a high level.
- Gross Profit Margin Trend
- In 2021, the gross profit margin stood at 63.80%. A slight decrease was observed in 2022, with the margin falling to 61.07%. The following year, 2023, saw a recovery to 61.95%. A more substantial increase occurred between 2023 and 2024, with the margin reaching 64.13%. The margin experienced a minor decline in 2025, settling at 64.06%.
The gross profit itself increased consistently throughout the period, rising from US$1,880,779 thousand in 2021 to US$5,768,700 thousand in 2025. This growth in gross profit contributed to the stabilization of the gross profit margin at a relatively high level in the later years.
- Revenue and Gross Profit Relationship
- Revenue also demonstrated consistent growth, increasing from US$2,948,037 thousand in 2021 to US$9,005,700 thousand in 2025. The concurrent increases in both revenue and gross profit suggest effective cost management alongside sales growth, supporting the observed margin stability.
The slight dip in gross profit margin in the final year, despite continued growth in both revenue and gross profit, warrants further investigation to determine if any specific cost pressures emerged in 2025.
Operating Profit Margin
Arista Networks Inc., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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: 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).
1 2025 Calculation
Operating profit margin = 100 × Income from operations ÷ Revenue
= 100 × ÷ =
2 Click competitor name to see calculations.
The operating profit margin demonstrates a consistent upward trend over the five-year period. Simultaneously, income from operations and revenue both exhibit substantial growth annually.
- Operating Profit Margin Trend
- The operating profit margin increased from 31.37% in 2021 to 34.86% in 2022, representing an initial expansion. This positive trend continued with further increases to 38.52% in 2023 and 42.05% in 2024. The rate of increase slowed slightly in the final year, with the margin reaching 42.82% in 2025.
- Relationship to Income from Operations
- Income from operations increased year-over-year, moving from US$924,739 thousand in 2021 to US$3,856,100 thousand in 2025. This growth in operational income directly supports the observed increase in the operating profit margin.
- Relationship to Revenue
- Revenue also experienced consistent annual growth, rising from US$2,948,037 thousand in 2021 to US$9,005,700 thousand in 2025. The combination of increasing revenue and a rising operating profit margin suggests effective cost management alongside revenue expansion.
The sustained improvement in the operating profit margin, coupled with growth in both revenue and income from operations, indicates strengthening operational efficiency and profitability over the analyzed period. The slight deceleration in margin improvement in 2025 warrants continued monitoring, but the overall trend remains positive.
Net Profit Margin
Arista Networks Inc., net profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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: 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).
1 2025 Calculation
Net profit margin = 100 × Net income ÷ Revenue
= 100 × ÷ =
2 Click competitor name to see calculations.
The net profit margin demonstrates a generally positive trend over the observed period. Initial values indicate strong profitability, which subsequently increases before experiencing a slight decline in the most recent year.
- Net Profit Margin Trend
- The net profit margin began at 28.52% in 2021. It increased to 30.87% in 2022, continuing upward to 35.62% in 2023. The most significant increase occurred between 2022 and 2023. Further growth was observed in 2024, reaching a peak of 40.73%. However, in 2025, the net profit margin decreased to 38.99%.
The consistent increases in net profit margin from 2021 to 2024 suggest improving operational efficiency, effective cost management, or favorable pricing strategies. The decline in 2025, while still representing a substantial profit margin, warrants further investigation to determine the underlying causes. Potential factors could include increased operating expenses, shifts in revenue mix, or heightened competition.
- Relationship to Revenue and Net Income
- The increases in net profit margin correlate with substantial growth in both revenue and net income. Revenue increased consistently throughout the period, and net income experienced even more pronounced growth. This suggests that the company is not only generating more sales but is also becoming more effective at converting those sales into profit.
Overall, the net profit margin indicates a financially healthy and increasingly profitable operation, although the recent decrease suggests a potential shift in dynamics that should be monitored.
Return on Equity (ROE)
Arista Networks Inc., ROE calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| 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: 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).
1 2025 Calculation
ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × ÷ =
2 Click competitor name to see calculations.
The analysis reveals a consistent and positive return on equity (ROE) over the five-year period. Net income and stockholders’ equity both demonstrate substantial growth, contributing to the observed ROE performance.
- Net Income Trend
- Net income exhibits a strong upward trajectory, increasing from US$840.854 million in 2021 to US$3.511 billion in 2025. This represents a significant overall increase, indicating improved profitability over time. The growth rate appears to be accelerating, with larger absolute increases in net income in later years.
- Stockholders’ Equity Trend
- Stockholders’ equity also shows consistent growth, rising from US$3.979 billion in 2021 to US$12.371 billion in 2025. This increase suggests a strengthening financial position and potentially increased investment in the company. The rate of growth in equity mirrors the growth in net income, though the absolute increases are proportionally smaller.
- Return on Equity (ROE) Trend
- ROE begins at 21.13% in 2021 and peaks at 28.91% in 2023. Subsequent years show a slight decline, with ROE at 28.54% in 2024 and 28.39% in 2025. While there is a minor decrease in the most recent two years, the ROE remains at a consistently high level, suggesting efficient utilization of shareholder investments to generate profits. The initial increase in ROE is likely driven by the rapid growth in net income, while the subsequent stabilization and slight decline may be attributable to the faster growth of equity relative to net income.
Overall, the financial performance, as indicated by these ratios, is positive. The company demonstrates a strong ability to generate profit from shareholder investments, and both profitability and equity are expanding.
Return on Assets (ROA)
Arista Networks Inc., ROA calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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: 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).
1 2025 Calculation
ROA = 100 × Net income ÷ Total assets
= 100 × ÷ =
2 Click competitor name to see calculations.
The Return on Assets (ROA) demonstrates a generally positive trajectory over the observed period, although with some moderation in the most recent year. Net income consistently increased from 2021 to 2024, while total assets also experienced substantial growth throughout the entire period. This combination drove the ROA performance.
- Overall Trend
- The ROA exhibited an increasing trend from 14.66% in 2021 to a peak of 20.98% in 2023. This indicates improving efficiency in utilizing assets to generate profit. However, the ROA experienced a slight decrease to 20.31% in 2024, and a more noticeable decline to 18.05% in 2025.
- Growth Phase (2021-2023)
- From 2021 to 2023, the ROA increased significantly. This growth was fueled by a more rapid increase in net income compared to the growth in total assets. The company effectively leveraged its asset base to generate higher profits during this period.
- Moderation Phase (2024-2025)
- The ROA’s decline in 2024 was modest, suggesting that while profitability continued to rise, asset growth outpaced it. The more substantial decrease in 2025 indicates a potential shift in the relationship between profitability and asset utilization. While net income continued to increase, the rate of asset accumulation was higher, resulting in a lower ROA. This could be due to investments in long-term assets that have not yet fully translated into increased earnings.
The observed trend suggests that while the company has been successful in generating profits from its assets, maintaining this efficiency will require careful monitoring of asset allocation and investment strategies, particularly given the recent moderation in ROA.