Arista Networks Inc. (NYSE:ANET)

Inventory Turnover

The inventory turnover ratio exhibits a declining trend from 1.85 in the first quarter of 2021 to a low of approximately 1.11 in the first quarter of 2024, indicating a slower rate of inventory movement over the period. However, a modest recovery is observed starting mid-2024, with the ratio increasing to around 1.38 by mid-2025. This suggests some improvement in inventory efficiency towards the end of the observed timeline.

Receivables Turnover

The receivables turnover ratio shows fluctuation throughout the periods, initially declining from 6.47 in early 2021 to a trough near 4.75 by the fourth quarter of 2021. Subsequently, it oscillates between lower and higher values, peaking around 6.75 mid-2023, and then stabilizing near the 5.0 mark by mid-2025. This indicates variability in the efficiency of collecting receivables, without a consistent trend of improvement or decline.

Payables Turnover

The payables turnover ratio is characterized by significant volatility. Starting at 6.52 in early 2021, it reaches lows around 4.74 to 5.39 in 2022 and peaks at 10.09 in early 2024, reflecting changing payment practices or credit terms. Towards mid-2025, the ratio settles to moderate levels near 5.23 to 6.86, suggesting variability but no clear long-term directional trend.

Working Capital Turnover

Working capital turnover steadily increases from 0.77 in early 2021 to a peak of about 1.04 during 2022 and early 2023, implying improved efficiency in utilizing working capital. After this peak, a gradual decline follows, dipping to around 0.76 mid-2025, indicating somewhat reduced effectiveness in turnover of working capital in later periods.

Average Inventory Processing Period

The inventory processing period consistently lengthens over the observed periods, extending from 197 days in early 2021 to a high of 328 days by early 2024. After this peak, a downward trend occurs, bringing it back to approximately 264 days by mid-2025. The increasing trend initially points to slower inventory movement, while the subsequent reduction suggests improved inventory management more recently.

Average Receivable Collection Period

Receivable collection period displays variability with an initial increase from 56 days in early 2021 to 77 days at the end of 2021. Afterward, it fluctuates mostly between 54 and 75 days, showing no definitive improvement but rather cyclical changes in collection efficiency. The collection period around mid-2025 is relatively higher, near 70 days, indicating longer outstanding receivables.

Operating Cycle

The operating cycle lengthens notably from 253 days early in 2021 to approximately 393 days by early 2024, indicating an extended combined inventory and receivables turnover duration. Post this peak, it shortens to around 326-339 days by mid-2025, signaling some efficiency gains in managing the overall operating cycle.

Average Payables Payment Period

The payables payment period shows fluctuations with values ranging from about 36 days to 77 days across the periods. Notably, it drops sharply in early 2024 to around 36 days, then rises again to roughly 70 days by mid-2025. This variability may reflect shifts in payment policies or negotiations with suppliers.

Cash Conversion Cycle

The cash conversion cycle lengthens from 197 days in early 2021 to a peak around 357 days in early 2024, illustrating the increasing time lag between cash outflows and inflows. A subsequent decline brings it down to about 269 days by mid-2025, indicating improved liquidity management and faster cash recoupment in the latest periods.

Cost of Revenue

The cost of revenue exhibited a consistent upward trend over the periods analyzed. Starting at approximately $242 million in March 2021, it increased steadily each quarter reaching around $767 million by June 2025. Notably, there was a more pronounced increase from early 2022 through 2023, suggesting rising expenditures associated with producing goods or services during these periods. The growth rate remained positive throughout, indicating increased operational activity or inflationary pressures affecting costs.

Inventories

Inventories demonstrated significant growth over the observed timeframe. Beginning at roughly $483 million in March 2021, they rose sharply to over $2 billion by June 2025. The increase was continuous, with marked acceleration from late 2021 onward, particularly notable through 2023. The inventory levels fluctuated slightly around the 2024 period but resumed upward movement thereafter. This escalation may reflect stockpiling strategies, supply chain adjustments, or preparation for anticipated demand increases.

Inventory Turnover

Inventory turnover ratios declined initially from 1.85 in March 2021 to a low of approximately 1.11 by March 2024, indicating slower conversion of inventory into sales. This decline suggests either inventory accumulation outpacing sales growth or potential challenges in inventory management efficiency. After reaching this trough, a modest recovery occurred, with the ratio increasing to approximately 1.38 by June 2025, implying some improvement in how quickly inventory is sold and replenished. Overall, turnover remained below the initial level from 2021, pointing to a structural shift or operational adjustments affecting inventory dynamics.

Summary

The data indicate that both cost of revenue and inventory levels have expanded significantly over the observed periods. While this may reflect business growth or increased operational scale, the declining then partially recovering inventory turnover suggests evolving inventory management challenges. The lower turnover ratios during mid-periods align with the substantial inventory buildup, highlighting potential efficiency concerns or strategic stockpiling. The partial recovery in turnover towards the later periods could indicate ongoing efforts to optimize inventory levels relative to sales. Monitoring these trends will be crucial for operational efficiency and cost control going forward.

Revenue Trends

The revenue demonstrates a consistent upward trend over the entire period. Starting from approximately $667.6 million in March 2021, it steadily increases each quarter, reaching over $2.2 billion by June 2025. This reflects robust growth in revenue, with occasional acceleration notably evident in the quarters starting mid-2022 through to mid-2024.

Accounts Receivable Dynamics

Accounts receivable exhibit more volatility than revenue, with fluctuations observed throughout the periods. Initially around $380.5 million in March 2021, the receivables rise substantially to approximately $923.1 million by December 2022, indicating possible extended collection periods or increased sales on credit. Following this peak, the values fluctuate in the vicinity of $779.7 million to $1.626 billion by June 2025, showing an overall upward movement but with less steady growth compared to revenue. Such patterns may suggest changing credit policies or collection efficiency over time.

Receivables Turnover Ratio

The receivables turnover ratio fluctuates significantly, varying between 4.75 and 7.22. The ratio peaked at 7.22 in June 2021, suggesting a relatively efficient collection of receivables during that quarter. However, the ratio generally trends downward after this peak, dipping to its lowest around 4.75 in December 2021 and again around 4.9 in June 2025. This downward pattern indicates a potential slowing in the collection efficiency relative to sales, possibly due to increasing receivables balances or longer collection periods. The turnover tends to improve sporadically but does not sustain peak efficiency levels over the long term.

Overall Insights

While revenue shows strong and steady growth throughout the analyzed period, accounts receivable increase at a less consistent pace, with pronounced volatility notably in late 2021 through 2024. The declining trend in receivables turnover ratio toward the later periods suggests a relative decline in collection efficiency despite increasing sales. This could imply that the company is extending more credit to customers, experiencing delays in receivables collection, or facing more challenging credit conditions. Monitoring these trends is critical to ensuring that working capital management remains effective as sales scale upward.

The cost of revenue demonstrated a clear upward trend over the entire period. Beginning at approximately $242 million in the first quarter of 2021, it increased steadily through subsequent quarters, reaching over $766 million by the second quarter of 2025. Notably, the rate of increase accelerated starting mid-2022, with pronounced growth continuing through 2024 and into 2025, indicating rising expenses associated with production or service delivery over time.

Accounts payable also exhibited growth but with pronounced fluctuations throughout the period. Initially, payables increased from around $137 million in early 2021 to a peak above $275 million in mid-2022. Subsequently, there were notable rises and declines, such as a decrease at the end of 2022 followed by a sharp increase again during 2023 and early 2024. The highest recorded value occurred near $544 million in the second quarter of 2025, indicating significant variability and possible changes in payment terms or purchasing activity over time.

Examining the payables turnover ratio, which measures how quickly the company pays off its suppliers, the ratio fluctuated notably without a clear long-term directional trend. The ratio showed peaks at several points, such as over 10 in the first quarter of 2024, suggesting periods of rapid payment to creditors. Conversely, troughs as low as about 4.7 appeared in mid-2022, indicating slower payment cycles during those intervals. These oscillations may reflect shifts in working capital management, supplier negotiations, or changes in credit terms. Overall, the variations in payables turnover imply that the company’s efficiency in paying its obligations has been inconsistent over time.

In summary, the data reveals steady and accelerating increases in cost of revenue, significant fluctuations with an upward trajectory in accounts payable, and variable payables turnover ratios. These patterns suggest growing operational scale accompanied by dynamic management of supplier payments, which could impact cash flow cycles and financial flexibility going forward.

Working Capital

The working capital shows a generally consistent upward trend over the observed periods. Starting at approximately 3.22 billion US dollars in early 2021, it gradually increases with some fluctuations, reaching about 9.45 billion US dollars by mid-2025. This indicates a steady growth in the company's liquid assets beyond its current liabilities, suggesting an improving short-term financial position and potential for increased operational capacity.

Revenue

Revenue exhibits a strong and steady growth trajectory throughout the periods. Beginning at 667.6 million US dollars in the first quarter of 2021, revenue continuously rises to reach 2.2 billion US dollars by the first quarter of 2025. The increase is notable in every quarter, indicating robust business expansion and increasing sales or service income over time.

Working Capital Turnover

Working capital turnover starts at 0.77 in the first quarter of 2021, reflecting the efficiency at which working capital is used to generate revenue. The ratio improves to a peak of about 1.04 during late 2021 and early 2023, demonstrating enhanced efficiency in working capital utilization. However, from 2023 onward, the ratio trends downward gradually to 0.76 by the third quarter of 2024, with a slight rebound to 0.84 by mid-2025. This suggests a cyclical variation in how effectively working capital supports revenue generation, with periods of both improving and declining operational efficiency.

Overall Insights

The data reveals a company experiencing sustained revenue growth coupled with increasing working capital. Although the working capital turnover ratio fluctuates, it generally remains close to or above 0.8 after an early increase, implying a generally healthy relationship between working capital and revenue generation. The slight decrease in turnover ratio in recent quarters may point to either more conservative management of current assets or challenges in maintaining the same level of efficiency amid growth. Nonetheless, the expanding working capital base combined with rising revenues suggests a generally positive financial and operational condition over the observed timeline.

Inventory Turnover Ratio

The inventory turnover ratio demonstrates a general declining trend from March 2021 through March 2025. Starting at 1.85, it gradually decreases to around 1.11 by the first quarter of 2024, indicating slower inventory movement over this period. However, from mid-2024 onwards, the ratio experiences a modest recovery, rising to approximately 1.38 by mid-2025. This suggests some improvement in the efficiency of inventory management, although the ratio remains below early 2021 levels.

Average Inventory Processing Period

The average inventory processing period shows an opposite trend to the turnover ratio, with a noticeable increase from 197 days in March 2021 to a peak of 328 days in the first quarter of 2024. This lengthening of the inventory processing period suggests that inventory is being held for longer durations over this timeframe. Post-peak, a decrease is observed, reducing to about 264 days by mid-2025, indicating a gradual improvement in inventory liquidation speed.

Overall Insights

Both metrics collectively indicate a period of declining inventory management efficiency from 2021 to early 2024, characterized by slower turnover and extended processing times. This could reflect challenges in demand forecasting, supply chain disruptions, or changes in product mix during that period. The partial reversal of these trends from 2024 onwards points to initiatives or external factors that have started to improve inventory control and turnaround, though the metrics have not fully returned to the earlier high efficiency levels observed in 2021.

The receivables turnover ratio demonstrates fluctuating trends over the periods analyzed. It reached a peak of 7.22 in the second quarter of 2021, indicating efficient collection of receivables during that time. Subsequently, the ratio generally declined, with notable dips in the fourth quarter of 2021 and the fourth quarter of 2022, standing at 5.71 and 4.75 respectively, which could suggest slower collection efficiency. Recovery attempts appeared in several quarters, such as the second quarter of 2023 with a rise to 6.75, but overall, more recent quarters reveal a downward trend, culminating in a ratio of 4.9 in the second quarter of 2025.

Concurrently, the average receivable collection period exhibits an inverse and corresponding pattern to the turnover ratio, as expected. It reached a low of 51 days in the second quarter of 2021, reflecting quick collection cycles. However, there is a general increase over time, with intermittent decreases. Notably, the collection period extended to as high as 77 days in the fourth quarter of 2021 and again to 75 days in both the first quarter of 2022 and the second quarter of 2025. The periods with lower receivables turnover ratios align with longer collection periods, suggesting a consistent relationship between these metrics.

Overall, the data imply increasing challenges in receivables management over the examined periods, as evidenced by reduced turnover ratios and lengthening collection times from mid-2021 onward. Although some quarters show improvements, the prevailing trend towards longer collection periods and lower turnover ratios indicates potential liquidity concerns or changes in credit policies that might require further investigation or action.

The quarterly financial data reveals notable trends in the company’s working capital management, particularly in inventory turnover, receivables collection, and the resulting operating cycle over the observed periods.

Average Inventory Processing Period

This metric shows a general upward trend from 197 days at the start of the period to a peak of 328 days by March 31, 2024. Subsequently, there is a gradual improvement, decreasing to 264 days by June 30, 2025. The increase in inventory days until early 2024 suggests the company was holding inventory longer, which could indicate challenges in sales velocity or inventory management. The subsequent decrease points to enhanced efficiency or efforts to reduce holding periods.

Average Receivable Collection Period

The receivables collection period fluctuates throughout the timeline, starting at 56 days and reaching a high of 77 days during late 2021 and again in late 2022. This variation suggests inconsistency in the speed of collections, which could reflect changing credit policies or customer payment behaviors. While some quarters show improvement, the overall trend towards longer collection periods in the later stages indicates that the company may be facing challenges in receivables management, impacting cash flow timing.

Operating Cycle

The operating cycle, which combines inventory and receivables periods, follows an upward trajectory from 253 days initially to a high of 393 days around March 2024. This expansion reflects a lengthening in the total time taken to convert inventory and receivables into cash. After peaking, the operating cycle shows signs of contraction, dropping to 339 days by June 2025, which, although improved, remains elevated relative to the beginning of the period. The extended operating cycle indicates increased capital tied up in operations, which could affect liquidity and operational flexibility.

Overall, the trends indicate that the company experienced growing inefficiencies in working capital management through early 2024, with longer inventory holding and receivables collection periods contributing to an overall extended operating cycle. However, the data towards mid-2024 and 2025 suggest strategic adjustments or operational improvements that have begun to reduce the operating cycle, potentially improving cash flow and financial stability going forward.

Payables Turnover

The payables turnover ratio exhibited fluctuations throughout the observed periods, with values ranging from a low of 4.74 to a high of 10.09. Initial ratios in early 2021 were relatively stable, hovering around 6.5 to 7.4, followed by a decline towards the middle of 2022, where the ratio reached its lowest point. Subsequently, the ratio showed an upward trend, peaking significantly in the first quarter of 2024, before experiencing volatility in later quarters. This demonstrates variability in the rate at which payables were settled, with some quarters indicating faster turnover and others slower.

Average Payables Payment Period

The average payables payment period inversely mirrored the payables turnover ratio, with days payable outstanding fluctuating between a minimum of 36 days and a maximum of 77 days. Early 2021 reflects a moderately stable payment period near 56 days, which extended to higher levels in mid-2022, suggesting slower payments to suppliers. Thereafter, payment periods contracted sharply to 36 days in early 2024, implying quicker settlements. However, towards the end of the timeframe, an increase to 70 days is observed, indicating a slower payables cycle again.

Overall Analysis

The data reveals a dynamic pattern in payables management over the quarters. Periods of rapid payment turnover typically correspond with shorter payment periods, and vice versa. The significant peak in the turnover ratio coupled with a low in days payable around early 2024 suggests a strategic push for faster supplier payments during that time. Conversely, the increasing payment period in the latest quarters may indicate a shift toward extended payment terms or slower cash outflows. These trends underscore changing liquidity management and supplier relationship strategies within the timeframe examined.

The analysis of the financial data over the specified periods reveals several noteworthy trends related to the company's working capital management, specifically focusing on inventory management, receivables, payables, and the overall cash conversion cycle.

Average Inventory Processing Period

The inventory processing period shows a generally increasing trend from 197 days at the beginning of the first period to a peak of 328 days during early 2024. After this peak, there is a noticeable decline, reaching 264 days by mid-2025. This suggests that inventory was held longer over the course of the periods up to 2024 but then the company improved inventory turnover efficiency towards the later periods.

Average Receivable Collection Period

The average collection period experienced fluctuations, with values starting at 56 days and increasing to as much as 77 days at certain points. The period peaked notably in late 2021 and again in early 2023. Despite these peaks, the collection period remained relatively variable without a clear long-term increasing or decreasing trend. Such variability signals irregularities in how quickly receivables are converted to cash, which could impact liquidity.

Average Payables Payment Period

The payables payment period displays significant volatility. The data show decreases and increases throughout, with a low of 36 days recorded in early 2024 and a high of 77 days in mid-2022. This inconsistency indicates fluctuations in the time taken to settle obligations to suppliers, reflecting possible changes in supplier negotiations, cash flow management, or payment policies.

Cash Conversion Cycle

The cash conversion cycle demonstrates an overall upward trend from 197 days in early 2021 to a peak of 357 days in early 2024, followed by a marked reduction to 269 days by mid-2025. The increasing cycle duration through 2024 implies that the time to convert investments in inventory and receivables back into cash lengthened significantly, potentially straining liquidity. The subsequent improvement suggests that the company took measures to enhance operational efficiency and reduce the working capital cycle in the most recent periods.

In summary, the company experienced a lengthening of its inventory processing period and cash conversion cycle until early 2024, indicative of potential challenges in inventory management and overall working capital efficiency. Receivables collection and payables payment periods fluctuated markedly, pointing to inconsistent cash flow timing. Notably, post-early 2024 data reflect improvements with shortened inventory and cash conversion cycles, aligning with better liquidity management and operational responsiveness in the latest periods analyzed.