Arista Networks Inc. (NYSE:ANET)

Inventory Turnover

The inventory turnover ratio showed a gradual decline from 1.74 in March 2021 to a low of 1.11 in December 2023, indicating slower inventory movement over this period. However, a modest recovery is observed in 2024 with the ratio increasing to 1.38 by June 2025, signaling a possible improvement in inventory management efficiency.

Receivables Turnover

This ratio demonstrated volatility across the timeline. Initially, it rose from 5.95 in March 2021 to a peak of 7.22 in September 2021, suggesting faster collection of receivables. Following this, there was a notable decrease to 4.75 by March 2022, fluctuating thereafter between 5.14 and 6.75. The downward movement toward 4.9 in June 2025 may reflect some challenges in collecting receivables timely.

Payables Turnover

Payables turnover exhibited significant fluctuations, with values ranging from a low of 4.74 in September 2022 to a high of 10.09 in June 2024. The peak suggests periods of prompt payment to suppliers, while the troughs may indicate lengthened payment periods. The overall trend does not show a clear directional movement but rather irregular changes month to month.

Working Capital Turnover

This ratio steadily improved from 0.76 in March 2021 to above 1.04 in December 2022, indicating enhanced utilization of working capital. However, from 2023 onward, a gradual decline was noted, dropping to 0.76 by March 2025, implying a reduced efficiency in generating revenue from working capital.

Average Inventory Processing Period

The average inventory processing period increased noticeably from 210 days in March 2021 to a peak of 328 days in December 2023, which indicates lengthier inventory holding times. This high level remained fairly consistent before slightly declining to 264 days by June 2025, suggesting some improvement but still indicating slow inventory movement compared to earlier periods.

Average Receivable Collection Period

Initially, the receivable collection period decreased from 61 days in March 2021 to a low of 51 days in September 2021, reflecting faster collections. Subsequently, it fluctuated and reached up to 77 days in December 2022 and again in June 2025, indicating variability and occasionally slower collection trends.

Operating Cycle

The operating cycle lengthened over the period, starting at 271 days in March 2021 and reaching as high as 393 days in December 2023. Although a slight decline occurred thereafter with 339 days recorded in June 2025, the overall trend points to an extended duration between purchasing inventory and collecting cash from sales, potentially pressuring liquidity.

Average Payables Payment Period

The payables payment period fluctuated considerably, with notable peaks at 77 days in September 2022 and 71 days in December 2023. Periods of shorter payment durations like 36 days in June 2024 alternated with longer periods. This irregular pattern implies variability in payment practices and possible strategic management of payables.

Cash Conversion Cycle

The cash conversion cycle increased from 212 days in March 2021 to a peak of 357 days in December 2023, signaling a prolonged period between cash outflows and inflows. Following this peak, there was a reduction to 269 days by June 2025, suggesting efforts to improve overall cash management and reduce the time capital is tied up.

The analysis of the quarterly financial data reveals several key trends and patterns regarding cost of revenue, inventory levels, and inventory turnover ratios over the observed periods.

Cost of Revenue

There is a clear upward trajectory in the cost of revenue from the beginning to the end of the data series. Starting at approximately $184.8 million in the first quarter of 2020, the cost steadily increases each quarter, reaching $766.2 million by the last quarter of 2025. The growth is consistent, though the rate of increase appears somewhat accelerated in the middle periods, particularly between 2021 and 2023.

Inventories

Inventories follow a similar overall increasing trend, beginning at roughly $261.8 million in early 2020 and climbing to over $2 billion by mid-2024 through to 2025. There is a pronounced growth especially noticeable from 2021 onwards, where inventory levels expand rapidly, almost quadrupling within a few years. This suggests an aggressive accumulation or buildup of stock. However, in the latter half of 2024, there is a slight decrease followed by a mild rebound, indicating some inventory normalization or optimization efforts.

Inventory Turnover Ratio

The inventory turnover ratio data is only available from late 2020 onwards. The ratio starts at 1.74 and generally trends downward until early 2023, dipping as low as 1.11. This decreasing trend suggests that inventory is turning over less frequently, which could imply slower sales or increased inventory holding periods. From mid-2023, the ratio shows a moderate recovery, climbing back to around 1.38 by mid-2025. This partial rebound hints at improved inventory management or stronger sales relative to inventory levels.

Overall, the data presents a scenario of continuous growth in cost of revenue and inventory levels, which are partially offset by a fluctuating but generally decreasing inventory turnover ratio until it begins to recover toward the end of the period. This combination indicates expanding operations with some challenges in inventory efficiency that appear to be addressed in the later periods.

The revenue exhibited a consistent upward trend over the reported periods, increasing from $523,029 thousand in the first quarter of 2020 to $2,204,800 thousand by the second quarter of 2025. This growth indicates steady expansion in the company's sales performance over the evaluated timeframe.

Accounts receivable, net, displayed a general increase in absolute terms, rising from $352,159 thousand in the first quarter of 2020 to $1,623,600 thousand by the second quarter of 2025. However, this increase was not strictly linear, with fluctuations and some quarters experiencing decreases after sharp increases. Notably, accounts receivable saw significant jumps in certain periods, such as between the third and fourth quarters of 2022.

The receivables turnover ratio, available from the fourth quarter of 2020 onward, fluctuated in the range of approximately 4.75 to 7.22, without showing a clear sustained upward or downward trend. Peaks were observed around the third quarter of 2021 and the third quarter of 2023, with ratios exceeding 6.7, while troughs occurred in the first quarter of 2023 and again in the second quarter of 2025, declining to values near 4.9. This variability suggests changes in the efficiency of collection of accounts receivable, with periods of relatively quicker collections interspersed with periods where receivables turnover slowed.

Overall, while revenue growth has been robust and continuous, the proportional increase in accounts receivable and fluctuations in receivables turnover ratio indicate varying efficiency in managing credit sales and collections. The rising accounts receivable amounts combined with periods of declining turnover ratios may imply occasional slower collections, potentially impacting liquidity dynamics at those times.

Cost of Revenue

The cost of revenue demonstrates a consistent upward trend from March 31, 2020, through June 30, 2025. Initially, it rose steadily from $184,778 thousand to $301,745 thousand by December 31, 2021. After a significant acceleration beginning in early 2022, costs increased sharply, peaking at $766,200 thousand in June 30, 2025. This reveals increasing expenses associated with generating sales over the analyzed period, suggesting either growth in sales volume, higher input costs, or a combination of both.

Accounts Payable

Accounts payable exhibited substantial volatility during the time frame. Starting at $84,815 thousand in March 31, 2020, the figure generally increased with notable peaks and troughs. Significant surges occurred around December 31, 2021 ($202,636 thousand) and June 30, 2023 ($351,920 thousand), followed by periods of decline and recovery. The final recorded values rise sharply to $543,900 thousand by June 30, 2025. This variability indicates fluctuating obligations to suppliers, potentially reflecting changes in purchasing activity, credit terms, or payment timing.

Payables Turnover Ratio

The payables turnover ratio, available only from September 30, 2020, onwards, shows considerable oscillation without a clear long-term trend. Initially around 6.23, the ratio generally fluctuates between 4.74 and 8.16 over most quarters. Notably high values occur at December 31, 2023 (8.16), June 30, 2024 (10.09), and December 31, 2024 (8.14), implying faster payment to suppliers during these times. Conversely, lower ratios like the 4.74 recorded in September 30, 2022 reflect slower payments or extended credit terms. This volatility suggests variable cash management strategies or supplier relationships over the periods analyzed.

Working Capital

The working capital shows a consistent upward trend from March 2020 through June 2025. Starting at approximately 2.76 billion USD in early 2020, it progressively increases each quarter, reaching about 9.45 billion USD by mid-2025. This steady rise indicates strengthened liquidity and possibly an expansion in current assets relative to current liabilities over the period.

Revenue

Revenue exhibits strong growth throughout the entire timeframe, commencing at approximately 523 million USD in March 2020 and climbing steadily to reach over 2.2 billion USD by June 2025. Notable spikes are observed in mid-2022 and beyond, with quarterly revenue rising sharply from around 877 million USD in early 2022 to above 2.2 billion USD by mid-2025, reflecting robust top-line growth.

Working Capital Turnover

Working capital turnover ratios are available starting from December 2020. Initially, the ratio is around 0.76 and remains relatively stable near that level until early 2021. Thereafter, it experiences a gradual increase, peaking around 1.04 in late 2022 and early 2023. Following this peak, the turnover ratio trends downward, declining steadily to approximately 0.76 by early 2025 before slightly rebounding towards the middle of 2025. This pattern suggests an initial improvement in the efficiency of working capital usage to generate revenue, followed by a reduction in efficiency in later periods.

Overall Insights

The data reveal continuous growth in both working capital and revenue, indicating expanding business activity and stronger liquidity positions. The temporary rise and subsequent decline in working capital turnover suggest that while the company initially improved its efficiency in using working capital to drive sales, this efficiency has waned in the most recent quarters. The declining turnover ratio despite increasing revenues could warrant attention to working capital management to sustain operational effectiveness.

Inventory Turnover Ratio

The inventory turnover ratio shows a declining trend from March 2021 through December 2023, moving from 1.74 down to a low of approximately 1.11-1.16. This indicates a slowdown in how quickly inventory is being sold and replaced over this period. Starting in early 2024, there is a modest recovery in turnover, rising back to around 1.38 by June 2025, suggesting some improvement in inventory management or sales velocity.

Average Inventory Processing Period

Consistent with the inventory turnover trend, the average inventory processing period, expressed in days, reveals a lengthening time that inventory remains before being processed or sold. From 210 days in March 2021, the period gradually increases, peaking at around 328 days in December 2023. This lengthening period reflects slower inventory movement. From January 2024 onward, the processing period begins to shorten, improving to about 264 days by June 2025, aligning with the improvement observed in the inventory turnover ratio.

Overall Inventory Management Insights

The data suggests that the company experienced a phase of declining efficiency in inventory management between 2021 and late 2023, as indicated by the decreasing turnover ratio and increasing inventory processing duration. However, from early 2024, there is an observable reversal in these trends, with turnover ratios increasing and processing periods decreasing, indicating enhanced inventory control or better alignment of inventory levels with sales.

Receivables Turnover

The receivables turnover ratio shows notable fluctuations over the reported periods starting from March 31, 2020, where initial data is not available until March 31, 2021. The ratio peaks at 7.22 during September 30, 2021, indicating relatively efficient collection of receivables at that point. Subsequently, the turnover ratio declines to a low of 4.75 by March 31, 2023, suggesting a slower collection process. After this trough, the ratio improves again, reaching 6.75 by September 30, 2023, before gradually tapering off to 4.9 by June 30, 2025. Overall, the receivables turnover demonstrates cycles of increasing efficiency followed by periods of reduced efficiency in collections.

Average Receivable Collection Period

The average collection period exhibits an inversely correlated pattern relative to receivables turnover. Initial values recorded are 61 days as of March 31, 2021, decreasing to 51 days by September 30, 2021, reflecting faster receivable collections. After this improvement, the collection period extends markedly to 77 days by March 31, 2023, indicating slower collection times. Subsequently, the period shortens again to approximately 54 days through mid-2023, followed by another lengthening trend that reaches 75 days by June 30, 2025. This alternating pattern points to ongoing variability in how quickly receivables are converted to cash.

Summary of Trends

The data reveals alternating periods of improved and deteriorated receivables efficiency. Peaks in receivables turnover correspond closely with troughs in the average collection period, and vice versa, confirming typical inverse relationships. The lengthening of the collection period during certain intervals may indicate challenges in receivables management or changes in credit policy or customer payment behavior. Conversely, periods with higher turnover and shorter collection days suggest strengthened receivables management and collection processes. The fluctuating nature of these metrics over multiple quarters suggests a need for ongoing attention to accounts receivable practices to stabilize cash flow and optimize working capital.

The analysis of the quarterly financial data reveals distinct trends in the company's operational efficiency and working capital management over the observed periods.

Average Inventory Processing Period

This metric shows a general upward trend starting from 210 days in March 2021 to a peak of 328 days in December 2024. After reaching this peak, there is a slight decrease, ending at 264 days in June 2025. The increasing inventory processing period through several quarters suggests a lengthening of the time inventory remains in stock before being sold or used, which may indicate slowing inventory turnover or changes in inventory management strategy. The decline towards the end of the period could imply efforts to improve inventory efficiency or adjustments in supply chain management.

Average Receivable Collection Period

The receivable collection period exhibits considerable fluctuations. Starting at 61 days in March 2021, it decreases to a low of 51 days in September 2020 but then rebounds with significant variability in subsequent quarters. Notably, it peaks at 77 days in March 2022 and another rise to 75 days in June 2025. This variability indicates inconsistent collection efficiency. Periods of extended collection days can strain cash flow, suggesting potential challenges in receivables management or customer payment patterns.

Operating Cycle

The operating cycle closely follows the upward trend observed in the inventory processing period, starting around 262 days in December 2020, increasing steadily to 393 days in December 2024, and then slightly decreasing to 339 days by June 2025. The lengthening of the operating cycle implies that funds are tied up in the production and sales process for longer durations, possibly affecting liquidity and overall operational efficiency. The small reduction towards the end may reflect improvements in inventory and receivables management combined.

In summary, the company experienced a significant lengthening of the inventory processing period and operating cycle over the examined timeframe, suggesting slower turnover and extended cash conversion cycles. Receivables collection showed irregular patterns, at times extending collection periods, which could impact cash flow. The slight improvements observed in the latter quarters may signal a strategic focus on improving working capital efficiency. Continuous monitoring and management of these operational periods are recommended to enhance liquidity and operational performance.

The analysis of the payables-related metrics reveals discernible fluctuations over the examined periods from the first quarter of 2020 through the second quarter of 2025. Two key indicators are presented: payables turnover ratio and the average payables payment period, measured in number of days.

Payables Turnover Ratio

The payables turnover ratio begins reporting data starting the first quarter of 2021, where it registers a value of 6.23. This ratio shows a general oscillation over the subsequent quarters. An upward movement is noticeable in the first four quarters of 2021, peaking at 7.39 in the fourth quarter of 2021. Following this peak, the ratio declines during most of 2022, reaching a low of 4.74 in the third quarter of the year. In 2023, the ratio exhibits variability, with peaks such as 8.16 in the fourth quarter. A striking increase is observable in the second quarter of 2024, where the ratio attains its highest value of 10.09, signaling a faster turnover of payables around that time. Towards the end of the data series, the ratio again declines somewhat, ending at 5.23 in the second quarter of 2025.

Average Payables Payment Period (Days)

The average payment period inversely mirrors many of the movements in the turnover ratio, as expected from their inverse relationship. Starting from 59 days in the first quarter of 2021, the payment period decreases through 2021, reaching 49 days by the fourth quarter of that year. However, in 2022, this period extends significantly, with values surpassing 70 days in the third quarter and stabilizing around high 60s through the year. In 2023, the days of payment period present reductions with a low of 45 days in the fourth quarter. A notable reduction occurs in the second quarter of 2024, with the payment period shrinking to a minimum of 36 days, coinciding with the peak observed in turnover ratio during the same period. Subsequently, the payment period fluctuates moderately, ranging between 45 to 70 days until the second quarter of 2025, where it ends at 70 days.

In summary, payables turnover and the average payment period exhibit an inverse dynamic, with increased turnover ratios generally corresponding with shorter payment periods and vice versa. The volatility of these metrics suggests periodic changes in payment practices, potentially influenced by operational adjustments or market conditions. An especially notable observation is the sharp rise in turnover and corresponding fall in payment period in mid-2024, indicating a significant acceleration in the rate at which the company pays its suppliers during that time frame.

The analysis of the presented financial metrics over multiple quarters reveals several noteworthy trends and fluctuations in the working capital management indicators.

Average Inventory Processing Period

This metric shows a general upward trend over the periods provided. Starting from 210 days in March 2021, the average inventory holding period gradually increased to a peak of 328 days by December 2024. Following this peak, there is a slight decline to 264 days by June 2025. This increase suggests that the company has been holding inventory for longer durations over time, which could imply challenges in inventory turnover or changes in inventory management strategy.

Average Receivable Collection Period

The receivable collection period exhibits volatility without a clear directional trend. It started at 61 days in March 2021, fluctuated with some increases reaching as high as 77 days in December 2022, followed by decreases and increases over subsequent periods. As of June 2025, it stands at 75 days, which is among the higher values within the dataset. This variability indicates inconsistent efficiency in collecting receivables, which could affect the company’s liquidity.

Average Payables Payment Period

The payables payment period also shows significant variability. Initially, it was 59 days in March 2021, with an increase to 77 days by September 2022, then a decrease followed by swings between 36 and 71 days across later periods. The lowest value occurred at 36 days in June 2024, followed by an increase again to 70 days in June 2025. This pattern suggests fluctuations in the company’s payment practices or terms with suppliers, affecting cash outflow timing.

Cash Conversion Cycle (CCC)

The cash conversion cycle displays an overall rising pattern throughout the timeframe, moving from 212 days in March 2021 to a peak of 357 days in June 2024, then moderating somewhat to 269 days by June 2025. Increasing CCC values typically indicate that the company’s cash is tied up longer in operational processes, which may affect liquidity and operational efficiency. The pattern largely mirrors the trends in inventory and receivables, with the increase in inventory days being a primary driver.

In summary, the data indicate a trend of elongation in the inventory holding period and fluctuations in receivable and payable days, culminating in an increased cash conversion cycle over most periods under review. This suggests growing challenges in working capital efficiency, potentially impacting liquidity management unless offset by other financial strategies not captured here. Timing and optimization of inventory and receivables collection remain key areas for focus to improve the overall cash cycle duration.